Witnesses to the Alameda Research Collapse: Attacks on the Co-conspirators of Ashtekar Bankman-Fried
The defense got me to doubt that Singh was aware of Alameda Research using FTX customer funds until September of 2022, when he said he wasn’t. After all, Yedidia put together so much that he got nervous about what Alameda was doing, and he wasn’t even doing anything shady like transferring money from his account to the Korean friend account. I am starting to get angry that no one is explaining what happened to the usernamesseoyuncharles88 and me even though I still do not know.
The prosecutor brought up a photo of the balcony to set the scene as Singh testified. Barbara Fried appeared incredulous as the luxury balcony appeared on the screen. Fried seemed to be looking at her son as Singh told the story of the conversation.
When November came, and the FTX collapse began, Singh said he was suicidal. He asked Bankman-Fried if the FTX CEO had orchestrated the whole thing. That didn’t happen.
So far, the prosecution’s witnesses have been credible — Caroline Ellison, the former CEO of Alameda, especially. The defense has been grinding away, trying to make it sound like Bankman-Fried’s alleged co-conspirators are just trying to save their own skins at Bankman-Fried’s expense. Three people have pleaded guilty to various crimes, made cooperation agreements and await sentencing. Sure, on some level, the suggestion that Singh may have been embezzling is worse for Bankman-Fried — Singh wasn’t a money guy, and someone had to approve it. The best thing the defense has done so far is undermine the credibility of a witness.
“I’ve always been intimidated by Sam,” he said. (The defense objected to this, and it was overruled.) Singh said that Bankman-Fried was a “formidable character, brilliant.” The actions of Singh and his co-conspirators were described as evil.
That was the introduction to how Bankman-Fried splashed his cash around. One of the investments was Genesis Digital Assets, a Bitcoin mining company. The idea of Bitcoin mining perplexed Judge Lewis Kaplan, who inquired about an explanation. (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.
Bankman-Fried wanted to commit $1 billion of capital to the firm in the long term, something Singh was against, and that was the reason he objected to it. Singh felt that the firm was a big problem for FTX and Alameda culture.
FTX Arena Manager Sam Bankman-Fried: A Case Study in Accumulating a Big Debt About a Financial Fraud
“Kendall and Kris Jenner, I honestly could not tell you what they do,” he said, inspiring another wave of laughter. It had been a funnier day in court.
We then saw a spreadsheet of endorsement deals, including those for Steph Curry, Tom Brady, Gisele Bundchen, the FTX Arena, and Larry David. In total, Bankman-Fried’s entities spent $1.13 billion on endorsement deals.
Singh was a thorn in Bankman-Fried’s side, as he invested broadly in real estate as well. We were able to see a list of properties FTX had leased and purchased, including two of Bankman-Fried’s apartments. (At this point, Joe Bankman and Barbara Fried switched legal pads, apparently their way of passing notes.) Singh didn’t want the penthouse, and other members of the group did as well. But Sam really liked this one, he said. “Sam’s a fan of views.” Bankman-Fried said he would pay his roommates $100 million to end the drama, which Singh took as a signal to shut up.
Singh was aware of a bug in the system that overstated how much Alameda owed. Essentially, the bug didn’t correctly track account withdrawals, making the amount Alameda owed FTX look bigger than it was. Singh said that Adam Yedidia — another witness — seemed worried about it Wang was relaxed because the direction of the bug was safe. If it underestimated how much FTX owed Alameda, it would have been a bigger problem.
In September 2022, Singh noticed that Alameda didn’t have nearly enough collateral on its obligations if the enormous line of credit wasn’t included. He said there were points where Alameda was $10 billion short on their collateral. So Bankman-Fried suggested that Singh, Wong, Ellison, and Bankman-Fried transfer their personal Serum tokens to Alameda. Singh was able to back-date the transfer to make it appear as if the money had been there all along. The purpose was to trick the Commodities Futures Trading Commission into thinking the data was fake. Singh didn’t want to.
Gabe Bankman-Fried met his political advisor, Nishad Singh, on a Signal chat in his campaign for a presidential candidate
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 said that he apologized to him at the end for asking for the meeting because he could tell it was not welcome.
Singh tried to cut spending in the hopes of closing the hole. But Bankman-Fried then invested $250 million in Modulo Capital, a hedge-fund led by some of his associates in September, and later in Anthony Scaramucci’s Skybridge Capital too.
Singh started talking about his political donations in testimony. Ryan Salame, the former FTX executive, is thought to have had access to Singh’s bank accounts. Money from Alameda would be wired in, then sent out to approved causes. This was coordinated on a Signal chat called “donations processing,” which included Gabe Bankman-Fried. When a confirmation request arrived in Singh’s email, he said that his role was to click a button.
The political consultant asked if they could get the money from NishadSingh for the Delaware Democratic party. Salame replied, “On it.” He messaged the group and told Singh to check his email to approve the transaction.
I have been struck by how close Bankman-Fried was to his college roommates and ex-girlfriends, as well as his brother and childhood friend.
I have written about Bankman-Fried’s defense twice and it has seemed confusing. They finally put some points on the board today.
Cohen began the tradition of roasting the witness. The roasts were to be expected, as Singh opining on whether spending $1 billion on sponsorships was excessive was when he was head of engineering.
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 defense, by contrast, doesn’t seem clear on the notion of chronological storytelling. We skipped around between September 2022, June 2022,November or December 2021, October 2022, and August 2020. Because I assume you also live in a unidirectional timeline, I am going to give my summary out of the order in which it was presented. I am not going to write about the struggle-bus aspects of the defense, because I am sick of it.
The jury didn’t hear about FTX’s first event without market makers assisting in liquidating an account: An explanation why Alameda wasn’t allowed to take the hit
In August 2020, FTX’s first event was without market-makers assisting in liquidating an account. lameda couldn’t step in because it had ran out of money What happened next was the use of auto deleveraging, a risk management system that sticks some traders with the loss. This kind of thing tends to make customers unhappy.
I am going to tell you about what the jury didn’t hear. We’ve heard before — from Wang and from Ellison — about a $65 billion line of credit extended to Alameda. Nobody on the platform had access to this amount of money. This is the first time that we have a plausible, non-criminal explanation for why Alameda got a huge line of credit. lameda would always take the hit and it would have a lot of options to do so. Singh didn’t remember whether Alameda’s line of credit was increased, but if the timelines do line up, that’s the least damning explanation for the line of credit.
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!
We are spending a lot of time with the bug, which I am confused about. In Yedidia’s case, it explains what he knew and why he knew it. Is it for everyone else? I think that the bug was so big that no one knew how much money was owed, and thus Alameda spent money it didn’t have. Ellison testified to making up seven fake balance sheets to send to banks, and that seems weak since Singh has testified about lying to auditors.
Singh testified that by September, he knew the money wasn’t there. And that was when Cohen brought up the Orcas Island house, which Singh bought in October 2022. I had to look that up afterwards because there were no photos or details on square footage, so I didn’t know how many bedrooms there were. He’d borrowed $3.7 million from the FTX exchange, despite his testimony yesterday about trying to slow down what he viewed as FTX’s frivolous spending. He didn’t see his own spending as frivolous.
We didn’t get any more cinematic retellings of conversations yesterday and Cohen’s tendency to jump around in time made the narrative less clear. Singh looked inconsistent, because the Orcas Island house undermined his moral authority. Even if the jurors don’t follow the timeline or get some of the other nuances, that’s pretty easy to grasp.
At the break, I saw Joe Bankman, the defendant’s father, talking with defense counsel. He looked happy, and who could blame him. The defense finally showed up according to the other people who thought that was the case.