FTX Executives Accused of Misusing $8B in Customer Funds for Real Estate, Donations, and Flashy Expenditures
In a shocking turn of events, FTX executives, including CEO Sam Bankman-Fried, are facing accusations of misusing $8 billion in customer funds for personal gain. Testimony from former senior FTX executive Nishad Singh has shed light on the alleged misuse of funds, revealing a trail of real estate purchases, donations, venture capital investments, and extravagant expenditures.
According to Singh’s testimony, he discovered an $8 billion hole in Alameda’s accounting in June 2022, which was attributed to an accounting bug. Singh, who has already pleaded guilty to fraud, money laundering, and campaign finance violations, confirmed that he approved transactions that he knew were depleting customer funds.
Singh’s testimony is supported by previous witnesses within Bankman-Fried’s inner circle, including FTX CTO Gary Wang, Alameda CEO Caroline Ellison, and FTX engineer Adam Yedidia. All three witnesses have implicated Bankman-Fried as the mastermind behind the alleged fraudulent activities.
Singh highlighted Bankman-Fried’s excessive spending habits and revealed that he often learned about large expenditures after the fact. Singh expressed his concerns about the lavishness of the spending and the misalignment with the company’s goals.
Prosecutor Nicolas Roos presented spreadsheets detailing how the $8 billion in customer funds was spent. Bankman-Fried was identified as the decision-maker for investments and investment team decisions. Notable investments included $1 billion on Genesis Digital Assets, a crypto mining firm, and $500 million on Anthropic, an AI company focused on safety. The prosecution also highlighted Alameda’s $200 million investment into K5 Global, a venture firm led by investor Michael Kives, known for his extensive network.
Bankman-Fried’s fascination with networking and influence is apparent in the testimony. Singh described Bankman-Fried’s excitement over meeting influential individuals at a Super Bowl party hosted by K5. Bankman-Fried proposed substantial financial terms to Kives and fellow investor Bryan Baum, stating that their connections could secure meetings with prominent figures such as Elon Musk, Barack Obama, Rihanna, and Mark Zuckerberg.
Despite Singh’s concerns about partnering with K5 and the toxic impact it could have on FTX’s culture, the deal proceeded with Alameda’s venture arm.
Bankman-Fried’s desire to increase FTX’s influence and visibility also led to significant endorsements and partnerships with celebrities. The prosecution revealed that FTX spent $205 million to rename the Miami Heat stadium to FTX Arena and $150 million to endorse the MLB. Additionally, over $1.13 billion was paid out for endorsements from personalities such as Steph Curry, Larry David, Tom Brady, and Giselle Bündchen.
Singh’s testimony also highlighted the purchase of extravagant properties, including a $30 million penthouse in the Bahamas. Bankman-Fried’s substantial donations to election campaigns were also revealed.
Singh expressed his concerns about the company’s spending but was largely dismissed by Bankman-Fried, who accused him of sowing doubt in the company’s decisions.
The revelation of an $8 billion hole in Alameda’s accounting was attributed to an accounting bug introduced into the system. Singh explained that this bug affected the correct accounting for fiat@FTX.com balances on specific types of withdrawals. On top of that, special privileges were given to Alameda, allowing them to trade, borrow, and withdraw funds beyond their balance and collateral amounts.
As a result, Alameda accumulated a $2.7 billion deficit on the FTX platform by June 2022. The combination of the accounting bug and negative account balances led to a massive $11 billion hole on FTX’s balance sheet.
The ongoing trial continues to unveil more shocking details regarding the alleged misuse of customer funds. Bankman-Fried faces serious charges of fraud and money laundering, while others within his inner circle have also faced legal consequences for their involvement.
These developments have raised concerns about the protection of customer funds in the cryptocurrency industry and highlight the need for stricter regulations and oversight. As the trial progresses, the crypto community and investors eagerly await its outcome, which could have significant implications for the future of cryptocurrency exchanges and their accountability.