FTX’s top engineer says Bankman-Fried spent $1.13 billion on celebrities

Nishad Singh, FTX’s former director of engineering, told jurors on Monday that Sam Bankman-Fried, the founder of the failed crypto exchange, spent huge sums of money on everything from real estate and venture investments to campaign donations and celebrity endorsements .

Singh stood trial in Manhattan federal court as the third week of Bankman-Fried’s criminal trial began, with prosecutors continuing to subpoena the defendant’s one-time closest confidants. Former girlfriend Caroline Ellison, who ran sister hedge fund Alameda Research, testified last week. She was preceded in death by Bankman-Fried’s former close friend and college roommate Gary Wang, who co-founded FTX.

In response to questions from Assistant U.S. Attorney Nicholas Roos, Singh said he often went to Bankman-Fried to express his concerns about the company’s spending. He told the court he would tell Bankman-Fried he was “embarrassed” and “embarrassed” and that the level of spending “reeks of excess” and “glamour”.

How Bankman-Fried, 31, spent money from FTX is a critical part of the prosecution’s case, as much of the alleged fraud revolves around what happened to billions of dollars in client funds that were supposed to be invested in crypto and held in client accounts, but later disappeared. Bankman-Fried faces seven criminal charges related to the collapse of FTX and Alameda, including wire fraud, securities fraud and money laundering, which could land him in prison for life. He pleaded not guilty.

Like Ellison, Singh is cooperating with prosecutors as part of a plea deal he agreed to in February. At the time, Singh pleaded guilty to six counts, including conspiracy to commit securities fraud, conspiracy to commit money laundering and conspiracy to violate campaign finance laws.

Singh, who grew up in the Bay Area, testified that he met the defendant during his sophomore or freshman year of high school through Bankman-Fried’s younger brother, Gabe. Singh studied electrical engineering and computer science at UC Berkeley and worked briefly at Facebook before joining Alameda in 2017.

Of the technology at FTX and Alameda, Singh said, “Sam didn’t code himself, but he was very involved in the coding process” and the details of the architecture. “Sam designed all the margin system rules and the liquidation mechanism” that are “fundamental to FTX,” he said.

Singh said he lived with Bankman-Fried in late 2021 at FTX’s lavish property in the Bahamas. He said he was “always in awe of Sam”, calling him a “great character”. But he said his admiration and respect “erodes over time.”

He said he first learned in mid-2022 of the hole in the balance sheet and the vast sums of money spent by Bankman-Fried on real estate, startup investments, speculative bets and political donations.

The court showed a spreadsheet of investments made in 2021. These included $1 billion for mining company Genesis, $499 million for startup Anthropic and $200 million for investment firm K5.

Singh said the cost of the K5 was most concerning. He said Bankman-Fried sent him a term sheet detailing hundreds of millions of dollars in bonuses for owners Michael Keeves and Brian Baum. This followed a K5 dinner, which Bankman-Fried attended along with Hillary Clinton, Katy Perry, Orlando Bloom, Leonardo DiCaprio and Kris and Kylie Jenner.

Singh said he told Bankman-Fried he was very concerned and that the investment in K5 was “extracting value.” He also said he asked Bankman-Fried if the investment was made with his money and not FTX’s. The spreadsheet showed it came from Alameda.

In a motion to dismiss a bankruptcy complaint against K5, lawyers for the firm said “plaintiffs’ attempt to make Kives and Baum complicit in SBF’s wrongdoing has no factual basis.”

Before the court took a break on Monday, the jury was given a separate spreadsheet of celebrity sponsorship deals. They include $205 million for Miami’s FTX arena, $150 million for Major League Baseball, $28.5 million for Stephen Curry, $50 million for Tom Brady and Gisele Bundchen, and $10 million for Larry David. The deals in the spreadsheet totaled $1.13 billion.

Singh admitted that even after he learned that customer money was involved in FTX’s expenses, he still implicitly and explicitly gave the go-ahead for transactions.

Singh said he owned 6% or 7% of FTX, making him a paper billionaire when the company was valued by private investors at $32 billion in early 2022.

Singh said that when he brought up his concerns about Bankman-Fried’s wasteful spending, he often got no response. If Bankman-Fried responds, he will say Singh didn’t have enough context, according to the testimony.

Singh gave an example of a more public interaction at work when he said the company had been “let loose for $20 million.” Singh said Bankman-Fried attacked him and said that people like him were responsible for sowing the seeds of doubt and were the real problem.

Before the trial resumed at 9:30 a.m. Monday, Bankman-Fried’s attorneys filed a late-night appeal Sunday with U.S. District Judge Lewis Kaplan, asking that their client be given more Adderall before being taken to court. Bankman-Fried told a Bahamian judge in December that he took medication to treat depression and attention deficit hyperactivity disorder, or ADHD.

The trial is expected to last until November.

— CNBC’s Dawn Giel contributed to this report

WATCHING: Caroline Ellison details SBF’s involvement in the management of Alameda Research

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