Sam Bankman-Fried directed political donations despite $13 billion
'hole', ex-colleague testified
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[October 17, 2023]
By Luc Cohen
NEW YORK -Sam Bankman-Fried directed that money from his Alameda
Research hedge fund be used to make political donations after he learned
the fund owed $13 billion to customers of his FTX cryptocurrency
exchange, a former executive testified on Monday.
Nishad Singh, the third former member of Bankman-Fried's inner circle to
testify against him at his fraud trial, said he learned about the
shortfall in September 2022 and confronted Bankman-Fried in an hourlong
conversation on the balcony of the $35 million Bahamas penthouse they
shared.
Singh said Bankman-Fried assured him he would raise more funds and cut
costs. But in the meantime, Singh said he continued to receive transfers
from Alameda and allow Bankman-Fried associates to use the money to
donate to U.S. Democratic candidates and causes in what he called a
"straw donor" scheme.
"There was an enormous hole," said Singh, FTX's former engineering
chief. "Alameda sending me money to spend ... necessarily deepened that
hole."
Prosecutors say Bankman-Fried looted billions of dollars in customer
funds to prop up Alameda, buy real estate and donate more than $100
million to U.S. political campaigns to burnish his influence. He has
pleaded not guilty, and argues that while he made mistakes running FTX,
he did not steal funds.
The testimony from Singh, who pleaded guilty in February to wire fraud
and conspiracy to violate campaign finance laws, gave the jury the most
vivid insight so far into how Bankman-Fried - who, liked Singh,
professed to believe in a movement called effective altruism that
encouraged young people to earn high salaries and give to charity -
spent the money prosecutors say was stolen.
Prosecutors showed a spreadsheet from March 2023 detailing $1.1 billion
in FTX endorsement deals, which included the naming rights to the Miami
Heat's basketball arena, as well as arrangements with NFL quarterback
Tom Brady, model Gisele Bundchen, basketball star Steph Curry and
comedian Larry David.
They showed jurors a photograph of Bankman-Fried at the 2022 NFL Super
Bowl with singer Katy Perry, actor Orlando Bloom and Michael Kives - a
former aide to Hillary Clinton who ran an investment firm called K5 that
Singh said Bankman-Fried called a "one-stop shop" to gain access to
influential people.
Singh said another FTX executive had told him the deals were meant to
help spur user growth. But Singh said the deals "reeked of excess and
flashiness" and that he urged Bankman-Fried to cancel them once he
learned about the shortfall in customer funds.
"This is crazy, we need to cut as much of them as we can," Singh said he
told the 31-year-old former billionaire in September 2022.
Bankman-Fried said the proposal to cancel the deals was "shortsighted,"
according to Singh. FTX declared bankruptcy two months later after a
wave of customer withdrawals.
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Nishad Singh, the former director of engineering at FTX, testifies
during Sam Bankman-Fried's fraud trial before U.S. District Judge
Lewis Kaplan over the collapse of FTX, the bankrupt cryptocurrency
exchange, at Federal Court in New York City, U.S., October 16, 2023
in this courtroom sketch. REUTERS/Jane Rosenberg
'I WAS A STRAW DONOR'
Bankman-Fried's trial, which started on Oct. 3, has so far focused
largely on how prosecutors say Bankman-Fried allowed Alameda to
plunder FTX customer funds. Jurors have already heard from Gary
Wang, FTX's former technology chief, and Caroline Ellison, Alameda's
onetime chief executive officer and Bankman-Fried's former
girlfriend.
Singh gave jurors a window into Bankman-Fried's political operation.
He said he often let Guarding Against Pandemics - a political action
group run by Bankman-Fried's younger brother Gabriel - use his name
to donate funds originating from Alameda.
Singh described a Signal group chat in which Sam Bankman-Fried,
Gabriel Bankman-Fried, or one of their political advisors would
frequently direct that a donation be made in Singh's name.
He said another FTX executive, Ryan Salame, had access to his bank
account to make donations via wire transfers. He said he also gave
one of Gabriel Bankman-Fried's assistants several signed blank
checks.
"I was a straw donor for campaign donations," Singh said. "I knew
that the money for those donations was coming from customer funds."
Bankman-Fried had grown to be known as a major donor to Democrats
after founding FTX in 2019. But Singh said it would provide
"advantageous optics" for some funds to look like they were coming
from someone else.
Bankman-Fried's lawyers are expected to cross-examine Singh on
Tuesday. Prosecutors have said they could rest their case as soon as
Oct. 26, at which point Bankman-Fried would have the chance to make
a defense case.
Defense lawyers said Bankman-Fried, who has attention deficit
hyperactivity disorder, needs a higher dose of Adderall than what he
has been receiving each morning in jail to fully participate in his
defense and decide whether to testify.
U.S. District Judge Lewis Kaplan on Monday denied a defense request
to delay the trial to explore options for increasing the dosage.
(Reporting by Luc Cohen in New York; Editing by Matthew Lewis and
Stephen Coates)
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