Sam Bankman-Fried was a bad friend of mine
The Collapse of the Cryptocurrency Company, Alameda Research, and Coins: Narrated by Sam Bankman-Fried
Singh claimed he wasn’t aware that Alameda Research was using FTX customer funds until September 2022, but the defense got me to doubt that. After all, Yedidia put together enough to get nervous about what Alameda was doing from handling the programming on the bug alone, and he wasn’t even doing anything shady like transferring money from Alameda’s account to the “Korean friend” account. I still don’t know what the deal is with the usernames “seoyuncharles88” and I am beginning to get pissed that no one is explaining it.
Nicolas Roos pulled up a photo of the balcony in which Singh testified to help set the scene. Barbara Fried, the defendant’s mother, appeared incredulous as the luxury balcony appeared on the screen. Fried looked at her son as Singh told the story of the conversation.
Singh said that when the FTX collapse began, he was suicidal. At one point, he asked Bankman-Fried to clarify that the FTX CEO had orchestrated the entire thing. That didn’t happen.
The prosecution was able to make the point that FTX was a bunch of scam artists, but Singh seemed more unreliable than he had initially testified. Singh wasn’t obligated to repay FTX money even though he felt morally obligated to do so. That’s because there was no paperwork associated with many of them — he just found large sums transferred to his bank account. They were loans in a way that was loose. The loans were not really loans.
Of Sam Bankman-Fried’s alleged co-conspirators, Nishad Singh gave the most emotionally compelling testimony. And on cross-examination, he also proved to be the most unreliable.
That was where Bankman-Fried started with his spending. One of the investments was Genesis Digital Assets, a Bitcoin mining company. Judge Lewis Kaplan asked about an explanation for the suggestion that there would be mining of digital currency. (It was one of several times this would occur with jargon Singh used in his testimony.) Singh explained that these were banks of computers solving puzzles in order to get a reward and add a block of transactions to the blockchain.
There was also a discussion of K5 Ventures, a venture capital firm run by Michael Kives. We saw a memo in which Bankman-Fried said Kives was “probably, the most connected person I’ve ever met” and described a dinner with guests such as Hillary Clinton, Doug Emhoff, Katy Perry, Orlando Bloom, Leonardo DiCaprio, Jeff Bezos, Ted Sarandos, Kendall Jenner, Kris Jenner, and Corey Gamble. Singh read the names aloud and briefly described what each did — though he didn’t recognize Sarandos or Gamble.
He said he couldn’t tell you whatKendall and Kris do, inspiring a wave of laughter. It had been a funnier day in court than most.
Sam Bankman-Fried met with Wall Street investor Joe Bankman and his hedge-fund wife Barbara Fried in 2002 on a spreadsheet with endorsement deals
We then received a spreadsheet with endorsement deals for Gisele Bundchen and the FTX Arena. The entities of Bankman-Fried spent more than $1 billion on endorsement deals.
Singh’s testimony pained Bankman-Fried as very loose with money — investing broadly in real estate as well. FTX leased and purchased both Bankman-Fried’s apartments as well as his parents’ apartment, on a spreadsheet we saw. (At this point, Joe Bankman and Barbara Fried switched legal pads, apparently their way of passing notes.) Singh and some other members of the group didn’t want the penthouse. But “Sam really liked this one,” he said. Sam is a fan of views. Finally, Bankman-Fried told his prospective roommates that he’d pay them $100 million to make the drama go away, which Singh took as a signal to shut up.
The code was put to use to let Alameda Research, which was co-owned by Wang and Bankman- Fried, withdraw money when it didn’t have any, according to Wang.
Singh didn’t explain why the name of the account was called “Korean friend” in August 2002 when he transferred money to it. The reason: to keep Alameda from having to make interest payments on the debt.
And that was why he wanted to meet with Bankman-Fried on the balcony; his bedroom was often used for meetings by others, and he wanted privacy to discuss the situation. They met a second time, in Bankman-Fried’s private apartment, after he returned from a trip to the Middle East to try to raise capital.
“I’m really not doing well,” Singh told Bankman-Fried, according to his testimony. Barbara Fried’s head was in her hands as he testified; she looked as if she might be crying.
As Singh talked to him, he noted that Bankman-Fried seemed to be on edge; he was grinding his teeth and closing his eyes, which Singh said were tells for when Bankman-Fried was angry. Singh apologized at the end of the meeting because he could tell it was not welcome.
He said that Singh tried to spend in the hopes of closing the hole. In September Bankman-Fried joined a hedge-fund led by some of his associates, and later in Skybridge Capital, which was managed by Anthony Scaramucci.
Singh signed blank checks for another bank account at Bankman- Fried’s request. Guarding Against Pandemics is an advocacy group that was used to make donations. Singh gave him a credit card but it didn’t work. A Paypal account had some issues. So an assistant was flown out to Singh with checks for him to sign.
In one conversation, a political consultant wrote, “Can we get the $20k from @NishadSingh for the Delaware Democratic party today?” Salame replied, “On it.” Then he messaged the group telling Singh that he needed to check his email to approve the transaction, as well as five others.
I have been struck, throughout the trial, by how the inner circle at FTX and Alameda were the people Bankman-Fried was closest to: his college roommates Adam Yedidia and Gary Wang; his ex-girlfriend Caroline Ellison; his brother’s childhood friend, Singh; his brother Gabe; and, of course, Barbara Fried and Joseph Bankman.
I have written twice about my frustrations with Bankman-Fried’s defense, which has often seemed meandering and confused. Today, they finally managed to put some points on the board.
Defense lawyer Mark Cohen began in the grand legal tradition of roasting the witness. Some of the roasts were to be expected: Why was Singh opining on whether spending $1 billion on sponsorships was excessive, when Singh was head of engineering, a department is decidedly not marketing?
Then Cohen landed a pretty good dig on the Bahamas penthouse. Billionaires and millionaires (on paper, at least) living together as roommates is objectively funny; one of said roommates being cross-examined solemnly on whether or not he thought it was “really expensive” to live in a $30 million apartment is even funnier.
After that, Cohen lost some steam. The prosecution has a strong narrative, even managing to bring witness testimony to emotional crescendos. The notion of chronological stories is not clear on the defense. Today we skipped around between September 2022, June 2022, November or December 2021, October 2022, and August 2020. You also live in a same way, so I’m going to give you a summary out of the order in which it was presented. I will not write about the places where Cohen missed and swung because I am tired of writing about the defense.
Why the jury didn’t hear about the 2020 FTX event from Alameda, or how Cohen and Cohen discovered the Orcas Island house
In August 2020, FTX had its first event where none of the market-makers, including Alameda Research, could assist in liquidating an account. (Alameda couldn’t step in because it had run out of collateral.) auto deleveraging is a different risk management system and it sticks some traders with a loss. Customers will be unhappy by this kind of thing.
I am going to tell you a bit more about how the jury did not get into this testimony. We’ve heard before — from Wang and from Ellison — about a $65 billion line of credit extended to Alameda. No one on the platform could have access to this amount of money. We now have a non-criminal explanation for why Alameda got a huge line of credit: so it wouldn’t make the other customers suffer through auto deleveraging. (Alameda would always take the hit instead, and it would always have enough collateral to do so.) Singh didn’t remember whether Alameda’s line of credit had been increased at this time, but if the timeframes do line up, that’s the least damning explanation for the line of credit I’ve heard yet.
It doesn’t undo the fact that Bankman-Fried repeatedly assured the public that Alameda had no special privileges on FTX — which seems like an obvious lie — but it does make the line of credit sound less bad. That’s not nothing!
I am confused about why we are spending so much time with the bug. It explains what he knew and why he knew it. For everyone else? The only thing I can think of is that I am to believe that the bug was so big that no one knew how much money Alameda actually owed, except that it was a lower amount, and thus Alameda spent money it didn’t have. Singh told auditors yesterday and last week that he lied to them, and this seems weak because Ellison testified about the fake balance sheets.
Singh stated that he knew the money wasn’t there by September. Cohen brought up the Orcas Island house that Singh bought in October 2022. (Sadly, there were no photos, details on square footage or number of bedrooms, so I had to look that up afterward: six bedrooms, a lap pool, and a hot tub.) He borrowed $3.7 million from the FTX exchange despite testifying that he was attempting to slow down frivolous spending on the exchange. I suppose he didn’t think his own spending was excessive.
The testimony wasn’t as great as Singh’s one yesterday, and Cohen’s tendency to move around in time made the narrative a little less clear. But the Orcas Island house undercut Singh’s moral authority, making him look inconsistent. It is easy to understand, even if the jurors do not follow the timelines or get some of the nuances.
I saw Joe Bankman talking with his defense counsel at the break. He looked happy, and who could blame him. I think I wasn’t the only one who thought the defense finally managed to show up.
