Thread by @BitMEXResearch

SBF Trial - Nishad Singh Testimony – 16 October 2023

Just as for the other FTX insiders, a quick admission of the crimes committed at the start

Q. What was your job at FTX?
A. I was the head of engineering.
Q. Did you commit financial crimes while at FTX?
A. I did.
Q. What crimes did you commit while working at the company?
A. I defrauded customers, investors, I participated in money laundering, and I violated campaign finance laws.
Q. Did you commit those crimes on your own or with others?
A. With others.
Q. Who?
A. Sam Bankman-Fried, Gary Wang, Caroline Ellison, Ryan Salame.

The $1 billion investment in Genesis Digital Assets. SBF, Ramnik, and Ryan Salame visited Kazakhstan to make the deal. SBF “called the shots” with the investment.

Q. Okay. So starting with the top of the sheet, do you see in column A2 and A3, Genesis Digital Assets?
A. Yes.
Q. And do you see the——in column E, what the category of that is?
A. Yes. Mining.
Q. So are you familiar with an investment in Genesis or a mining company?
A. Yeah. I don't——yes. I don't recognize the name Genesis Digital Assets, but I know that Sam, Ramnik, and Ryan Salame visited Kazakhstan sometime in late 2021 or early 2022 to look into making a deal with a mining firm there, and I heard later in 2022 from Ramnik that they had spent a billion dollars on it.
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Q. What, if any, involvement did the defendant have in acquiring or investing in the mining company you heard about?
A. I think he was calling the shots there. He went to go visit them for multiple days. That's a pretty extreme sort of sacrifice in Sam's calendar.

$500m Anthropic Investment - SBF had “extreme” involvement in the deal

[This appears to have subsequently been a very good investment from a returns perspective]

Q. Let's take a look at row 4 here on the spreadsheet. Do you see a payment to a project name called Anthropic and the investment amount of $499,999,900?
A. Yes.
Q. Are you familiar with Anthropic?
A. Yes, I am.
Q. What is it?
A. It's an AI company focused on AI safety.
Q. Do you know what the almost $500 million to Anthropic was for?
A. I know what we were told it was for. It was compute.

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Q. Did you have conversations with the defendant about a payment to Anthropic?
A. I did.
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Q. What did the defendant say to you?
A. That we were going to invest $500 million in Anthropic.
Q. Okay. And what involvement, if any, did the defendant have in the Anthropic investment?
A. Extreme amount of involvement. I was in the Hong Kong office
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Q. Based on your conversations and your observations, what, if any, involvement did the defendant have in the Anthropic investment?
A. He set it up and decided on it.
Q. What entity does the spreadsheet say was the investment entity for these Anthropic investments?
A. Alameda Research Ventures LLC

The $200m investment into K5 – SBF went to a dinner organised by the K5 folks, where gusts included: Hilary Clinton, Kamala Harris's husband, Katy Perry, Orlando Bloom, Kate Hudson, Leonardo DiCaprio, Jeff Bezos, Kendall Jenner and Kris Jenner. SBF was impressed with the connections and was working on a deal to pay the K5 folk hundreds of millions of dollars in bonuses and giving them a billion dollars for their VC fund

Q. Okay. Now who ran K5?
A. Michael Kives and Bryan Baum.
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Q. And did you ever speak to the defendant about meeting Michael Kives and Bryan Baum?
A. Yes.
Q. And what, if anything, did he say to you about that?
A. He was very impressed with their——their level of connection to influential celebrities and entrepreneurs. He thought it would be useful for FTX to leverage those connections.
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A. Sam said that he had gone to a post- or pre-Super Bowl party in LA and that he had met the most impressive collection of people he ever had in one location and that that dinner party in which he met them was organized by the two folks at K5.
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Q. And now with this list of names of people who were at the dinner, if you recognize a person or people on the list, can you say who they are.
A. Sure. I can go through them now?
Q. Please.
A. Hilary Clinton. She was a presidential candidate.
A. Doug Emhoff, who is Kamala Harris's husband; Katy Perry is a singer; Orlando Bloom is an actor; Kate Hudson I believe is an actress; Leonardo DiCaprio is an actor; Jeff Bezos ran Amazon. I don't know No. 8. I don't know No. 11. Kendall and Kris Jenner, I honestly could not tell you what they do.
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Q. It says, "We can get from them essentially infinite connections. I think that if we asked them to arrange a dinner with us, Elon, Obama, Rihanna and Zuckerberg in a month, they would probably succeed." Did you have any conversations with the defendant about getting connections through Michael Kives or K5?
A. Yes.
Q. And what, if anything, did the defendant say to you about the purpose of getting connections?
A. That it would be extremely valuable for FTX's and his own reputation and influence.
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Q. Now what, if any, conversations did you have with the defendant about investing in K5?
A. Sam sent a——like a term sheet of a Google Docs to me and Gary one night after meeting with Bryan Baum in the Bahamas penthouse.
Q. After receiving that term sheet what, if anything, did you discuss?
A. I was pretty shocked. It laid out hundreds of millions of dollars of bonuses to Michael Kives and Bryan Baum and proposed up to a billion dollars long term of capital to give to their VC firm.

FTX’s Sponsorship deals

Q. How much did the Miami Heat arena sponsorship cost?
A. Summing the first three numerical values in column O, it's $205 million.
...
Q. What does MLB stand for?
A. I think Major League Baseball.
Q. What was the total deal amount?
A. I don't know if rows 9 and 10 contribute, but around $150 million.
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Q. And do you know who Steph Curry is?
A. Yes, a great basketball player.
Q. And did FTX have any sort of arrangement with Steph Curry?
A. Yes.
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Are you familiar with Tom Brady and Gisele Bündchen?
A. Yes.
Q. And who are they?
A. Tom Brady is a great quarterback; Gisele Bündchen is a model and philanthropist.
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Q. And do you see the name Larry David?
A. Yes.
Q. Who is that?
A. He wrote Seinfeld.
Q. Okay. And do you know what the sponsorship was for?
A. This was for his role in the Super Bowl ad.
Q. Now let's look at line 72. And what was the total deal amount?
A. 1.13 billion.
[We are not sure what this amount refers to]

Real Estate – The story of how the penthouse apartment was aquired

Q. Let me ask you more specifically then, what, if any, conversations did you have with the defendant generally about spending on real estate?
A. I had one conversation with him while I was still in Hong Kong, where he was talking to a group of people that I was in. He praised Dan Friedberg and Ryan Salame's real estate purchases freely.
Q. And what, if any, conversations did you have with the defendant about purchasing the penthouse apartment that's depicted on the screen?
A. That group I mentioned, we wanted to live together, so we were searching for a place, we'd landed on one a fair bit less expensive; we went——some group went to go see this apartment. Sam really liked this one. Sam's a fan of views. And there was substantial disagreement about if we should go with it, in part because it was really expensive, in part because it's just super ostentatious. At one point I talked to Sam and expressed that discomfort. Sam said that he would pay $100 million for the drama to just be done with and go away, which I took as a pretty clear sign that I should shut up and we should move forward with this.

The need for liquidity in the 2022 Terra Luna crypto crash

The idea of potentially purchasing lenders like Celsius, Voyager and BlockFi had two purposes:
1. To bail out the space;
2. “to make Alameda have access to more funds to borrow”

Q. You mentioned a few things: Borrowing, raising. Was there anything else in your answer about what he raised in the conversations?
A. There were specifics along those lines. For example, Ramnik and Sam, I don't remember which proposed it at first, but both talked about it a lot, discussed the idea of acquiring large lending -- large sources of capital that may or may not have been lending to customers of the business, groups like Celsius, Voyager, BlockFi, in part to bail out the space and in part to make Alameda have access to more funds to borrow.

Alameda accepted FTX customer fiat deposits from the very start, before the main FTX website even went live

A. Very, very early in FTX's existence. One of the first things that FTX did before going live was connecting it to , which was a reskin of another OTC system that Gary and Sam had built. That system supported depositing fiat into Alameda's bank accounts. That system could be used to onward funds via fiat deposits to FTX once they were linked.OTC.FTX.com

Nishad’s view on using customer funds

Q. What was your understanding as to whether Alameda was allowed to use or spend the FTX customer fiat deposits it had received?
A. I didn't have an affirmative understanding, but using it would break common-sense expectations from customers.

…

Q. If you have the feature turned on that allows negative, what does that allow?
A. It allows you to withdraw more your balance such that you can have a negative balance in the end without bound.
Q. What, if any, involvement did you have in creating that feature?
A. I wrote the first version of allow negative, which had meaningfully different abilities.
Q. Before I ask you about the abilities, when you say you wrote it, what do you mean? What are you referring to?
A. Under Gary's and Sam's advisement and direction, I wrote the computer code that added this allow negative feature to the code base.

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Q. When Alameda had a negative balance in its account and was withdrawing money, where did that money come from?
A. Other customers.
Q. Why?
A. There is only a few sources of funds that comprise what's in FTX's wallets. There is FTX's revenue. Then there is customer assets less Alameda and there is Alameda assets. If Alameda's like stated ownership of an amount is zero and then they go and withdraw it, it must necessarily be coming from one of the other parts or both. For non-USD tokens, if FTX only made revenue in USD-like tokens, then it was necessarily coming from other FTX customers.

…

Q. What was your understanding as to whether using customer funds was appropriate?
A. It was inappropriate.
Q. Why?
A. Does not meet the default expectations a customer would have. And I don't ever recall it being stated to customers that their funds were being taken, and I remember affirmative descriptions from Sam and others that Alameda didn't have special treatment, and this would constitute a form of special treatment.

[e-mail] – SBF did not want Alameda to pay interest on its large loan from FTX customers. Therefore, the balance was moved to a location where there was no interest charge. It was moved to an account called: [e-mail]

Q. Now what, if any, conversations did you have with the defendant about the charging of interest on this account?
A. I brought this up with him. I said, it looks like after the splits that Adam and Andrea did of FTX versus Alameda fiat liabilities, they put it inside a subaccount that's contributing to the amount that Alameda is charged in interest.
Q. What, if anything, did he say in response?
A. He said that seemed incorrect, in theory those balances are in banks, it's not something that they're borrowing in sort of the traditional sense, they're custodying it, so they shouldn't be charged interest, let's move as a liability out of a location where it's being charged interest.
Q. What happened next?
A. I followed his instructions. I asked a group with a bunch of Alameda FTX and traders——Alameda traders and developers and FTX developers if there was an account that I could move this to that they were tracking so they wouldn't lose track of it such that it was——such that it wouldn't be charged interest anymore, and I believe one of Terence Choo and Caroline Ellison gave me the name of the account to move it to.
Q. And who was on——who do you recall being on that message exchange about this?
A. This was in Signal. At the very least it included me, Gary, Adam, Andrea, Sam, Terence Choo, and Caroline Ellison. I believe it also had other Alameda traders and FTX developers.
Q. And so was this FTX fiat old account moved?
A. Yes.
Q. To what account was it moved to?
A. I moved it to the account that I was given by the Alameda traders, one called [e-mail].

FTX never implemented liquidations. If a customer was liquidated at price worse than the bankruptcy price, FTX never implemented any system to deal with that loss.

Q. What's a clawback?
A. A clawback is a mechanism for resolving any losses that arise from a liquidation. And by losses here, I mean instances in which the account being liquidated ends up negative. So you could imagine that somebody has——same thing——a thousand dollars of collateral, they make a bet, and before the liquidation is complete, their futures position has actually lost $1,001, so they've lost more money than they ever deposited in collateral.
There's negative $1 around to resolve. One way of resolving this is through a clawback, a system in which that 1 dollar is——that loss is sort of socialized, so it's called, across a bunch of other users, as in everybody else pays.
Q. While you were working at FTX did it ever do clawbacks?
A. No, not that I'm aware of.
Q. And what did the code say, if anything, about clawbacks?
A. Yeah, I brought this up with Sam and Gary at some point when I discovered it. Clawbacks weren't even implemented.
Q. What do you mean "weren't even implemented"?
A. That the code could never cause a clawback.
Q. So what does that mean?
A. Even in instances in which a customer account ended up negative and the insurance fund, which is a sort of bailout pool of cash, was empty, the expected option for resolving the negative balance would be a clawback, but there was nothing in the code that would do that. Instead, the account would remain negative and——and Sam and Gary or others would sort of manually handle it however they saw fit.

SBF wanted to include employee Serum in the collateral, to make it appear like Alameda had more collateral than it did. FTX employees purchased Serum at the coins genesis and Sam decided how much everyone could buy

Q. So circle back to your conversation with the defendant on September 1st or 2nd. After you told him that Alameda did not have enough collateral in FTX without its line of credit, what, if anything, did he say?
A. His first question was if I was including all of Alameda's other subaccounts and accounts on the system. I responded no, the purpose of this exercise was just for evaluating Alameda's main account, the one we've seen with account ID 9. Sam came back to me sometime later and asked if I could transfer in the Serum that I, Gary, Caroline, and Sam personally held into Alameda's main account, at some historical time, to make it appear that Alameda always had more collateral than it did.
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Q. And why did you, Gary Wang, and Sam Bankman-Fried have Serum in your own accounts?
A. We, like other employees, bought a lot of it at Serum's genesis. Sam decided how much everyone could buy. I think everyone bought the maximum allotted amount.

The private chat with SBF on the balcony in the evening

Q. And where did you speak with the defendant?
A. On the balcony of the Orchid 6 penthouse where we lived.
Q. Why did you meet on the balcony?
A. Sam and I almost never met; very, very rarely. I knew this needed to be really private. I figured that if we went to our two most common spaces to talk, which were my room or in the office, that both of those were very frequently used by other people for meetings and that others could stumble in on us, and I knew that there was something really serious going on and I didn't want people stumbling in.
Q. What time of day was this?
A. Evening into night.
Q. How long was your conversation with the defendant on the balcony?
A. Hour, hour and a half.
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A. He said: I'm not sure what there is to worry about. NAV is fantastic by almost any measure. It was super positive even if you don't include FTX and equity.
Q. Did you speak to the defendant directly about the hole?
A. Yes.
Q. And what did you discuss?
A. I said next: Well, what about what Caroline said today and Gary said today, that there's 13 billion borrowed and we can't pay it all? Sam said: Right, that. We are a little short on deliverable.
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Q. Now what, if anything, did the defendant say about how this had been affecting him over the prior year?
A. He did describe it. I said something like "Jesus F'ing Christ." Sam said: Yeah, this has been taxing me some 5 to 10 percent of my productivity for——and he either said for this year or like for this calendar year or since before the last year. I said: I think this is going to be doing a lot more damage to me, hitting me a lot harder. Sam said: Yeah, I was worried about this. In hindsight, it might have been a mistake
for me to circulate that document this morning. People are thus going to freak out. I said: I understand it's not productive to respond emotionally.
Q. What, if anything, did you discuss about a plan for addressing Alameda's negative balance?
A. I asked what the hell the plan was, what are we going to do. Sam said he's not too worried and he described a number of sort of strategies that we could pursue in parallel going forward.
Q. What kind of strategies did he describe?
A. He described selling off Alameda's illiquid but, according to his estimation, valuable assets, and properties; he described, for the ones that weren't sellable but generated revenue, making sort of low-hanging changes to make them more profitable; he discussed raising from investors, selling FTX equity; and he discussed making FTX——oh, he said that futures, which we believed would come online, you know, any day now, would be a boon to the company, and would be great for revenue and for its valuation, and that there were many engineering projects that were crucial and were themselves very valuable.
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A. I asked if now, Sam would take seriously cutting expenses or——and curbing them going forward. He said yes, definitely, he's working with that——working on that with Ramnik.
Q. After this conversation, what was your mental state?
A. I was blindsided and horrified. I felt really betrayed, that five years of blood, sweat, and tears from me and so many employees, driving towards something that I thought was a beautiful force for good, had turned out to be so evil. I knew that customers were betrayed. So many customers had to put their trust in us. And, you know, according to Sam's take, chances to rebuild this hole depended enormously on me continuing to try to make the company successful, and I knew that would require me betraying customers and employees.

In September 2022, while SBF was in the Middle East trying to raise money, SBF pitched the idea of a deal with Telegram to get $TON tokens. This would cost $120 million

A. There was a point when Sam was in the Middle East, he sent a message to a Signal group called hashtag meetings, or hashtag groups, which contained a lot of folks in leadership——maybe some eight or ten of them——basically pitching that FTX do a deal with Telegram.
Q. And what happened in response to that proposal?
A. Yeah, Sam described that FTX could build a payment-processing service for Telegram and that Telegram would give us a lot of TON, which was their coin, some hundreds of millions of dollars' worth. Seemed like a huge win, wasn't a big lift to build this payment service, probably, and we get a lot of money for it. Ramnik clarified that we'd also pay $120 million for it
Q. How did you respond to that?
A. Made me extremely nervous. Getting even longer random illiquid tokens was not something I was excited about, especially when the cost would come from customers.
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Sam ultimately said to the larger group: We're going ahead with this, Ramnik and I are. You guys shouldn't feel responsible for it. That's not why I shared it. Unless you have any serious new objections, we're going ahead.

Political donations

Q. Walk us through how the donations were made.
A. There was a Signal chart called donations processing in which Sam or Gabe, his brother, or Michael Sadowsky, who worked with Gabe, or their associates would request that a donation be made in my name. Ryan Salame, who had access to my bank account, would transfer money out of my bank account for that purpose, and in some of the cases, I think when the size of the transfer was large enough, there would be an email that would go to me. I would get prompted, often repeatedly because I was usually delinquent, to click on the approve button, and then it would go out.
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Q. Now, you testified that many of these donations you were not involved in. What is your understanding about why the
donations were made in your name?
A. For advantageous optics, that it was useful for my name to be associated with some donations, even if the end recipient understood that they were really coming from someone else.
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Q. What were you referring to with transactional purposes?
A. That on its face a donation may appear to be for one purpose, say going to a PAC called the LGBTQ Victory Fund. But, in reality, the true purpose is something else, and it may be the funds end up affecting some outcome that seems unrelated to LGBTQ efforts.

Manipulating FTX’s revenue upwards to trick FTX investors

Q. When you were working at FTX, did you ever work on a project relating to making FTX's revenues higher?
A. Yes.
Q. And when approximately was that project?
A. December 30 or 31 of 2021.
Q. Can you describe what the project was.
A. I made transfers from one of Sam's companies to another, to FTX, to make it appear as though FTX had higher revenues.
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Q. Before the project, what had FTX's revenues been calculated to?
A. Around 950 or $960 million for that year.
Q. What was the project that you worked on?
A. Sam messaged me and Gary and possibly others, but certainly the two of us, in Signal asking what we could do to get revenue over the line of a billion dollars.
Q. What, if anything, did you discuss in that Signal message -- conversation after that?
A. Sam and Gary talked about a number of options. In the end, Sam landed on charging for the service of Serum staking.
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A. The defendant -- Sam proposed charging ECO Serum to the account that paid the interest, 25 percent of the USD
equivalent of the interest distributed to FTX.
Q. And how, if at all, would that affect FTX's revenues?
A. It would -- I know that, after calculating, it was determined that it would bring it over the line of 1 billion.
I think that it added $50 million or so in revenue.
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Q. What, if any, was the plan with respect to when to charge those payments to ECO Serum?
A. I was told to make it appear as though they had been getting charged throughout the year, so to backdate the transactions associated with paying this fee.
Q. Who told you that?
A. Sam.
Q. And what do you mean, backdating the charging of the fee?
A. The FTX database that he looked at has time stamps in it for when transactions happen, but in some cases those [time] stamps are mutable and can be adjusted and changed. So I was being asked here to make transfers and then to go into the database and reassign the dates for them.
Q. What would the effect have been of making those transfers?
A. The effect of making the transfers would have been to increase FTX's stated revenue, but not real revenue, by some $50 million, and the effect of the backdating would be to make it appear as though that had been getting paid out throughout the year, as opposed to all at the end