Sam Bankman-Fried spent more than $1 billion on celebrity endorsements and naming rights and invested $200 million in a venture capital firm to gain access to investors, a former employee testified Monday. Influencer looking to promote his cryptocurrency exchange FTX.
Nishad Singh, a former engineering director at FTX who has pleaded guilty and agreed to testify as a prosecution witness, said Bankman-Fried attended a dinner party in Los Angeles in early 2022 Later agreed to pay the amount, with guests including Katy Perry, Leonardo DiCaprio, Jeff Bezos, Kendall Jen Na and Hillary Clinton, among others. The dinner was hosted by K5 Global, a venture capital company that received investment.
Prosecutors introduce photo from Katy Perry’s Instagram account of Bankman-Fried with Perry, Orlando Bloom, Kate Hudson (Kate Hudson) and K5 executives pictured at the 2022 Super Bowl.
The $1.13 billion in endorsement spending includes naming rights to the Miami Heat’s home court ($205 million), as well as payments to Tom Brady and Giselle Bundchen ($68 million) and Larry Big Larry David ($10 million), all of whom appear in FTX ads. Other payments included Steph Curry ($30 million) and the company behind the video game League of Legends.
Singer, who holds a minority stake in FTX, testified that he objected to the payout, saying it seemed expensive and “really harmful to FTX’s culture.” Singer asked Bankman-Fried if FTX could withdraw, but he was told the deal was done.
“In these areas, increasing FTX’s presence will help drive its success,” Singer testified. He added that Bankman-Fried described K5 in a memo as “one of the things we should be using.” A one-stop relationship store.”
Singer admitted at the start of his testimony that he defrauded FTX customers and investors, including by approving transactions that he knew came from client funds and by falsifying company records to exaggerate revenue and losses. Singh, a high school friend of Bankman-Fried’s younger brother, said he worked at Bankman-Fried’s trading firm Alameda Research in 2017 and switched to work at FTX in 2020. He described a relationship with Bankman-Fried that evolved over the years from admiration to distrust.
“I was always intimidated by Sam because Sam was a formidable figure, he really was,” Singer testified. “I have a lot of admiration and respect for him. I think that admiration and respect has faded over time.”
Singer said he asked to forego cash bonuses at FTX in favor of equity starting in 2020, resulting in an ownership stake of 6% to 7%. “I’m a billionaire,” he said.
Singer testified that he helped create computer code in the FTX system that allowed Alameda to run negative account balances, a feature not available to any other customer on the FTX exchange. When Alameda withdraws funds while its account is negative, the funds are withdrawn from the client’s account. When it was first enabled, Singer viewed it as a positive feature that would help Alameda facilitate trading on the exchange. But it was only intended for occasional, small-scale use, and he was shocked when he learned in June 2022 that Alameda had developed a multi-billion-dollar shortfall.
“This concerns me very much. This appears to be a real abuse of a feature that up until this point I thought was serving FTX rather than harming it,” he told prosecutor Nicholas Roos. Asked. “It’s inappropriate. It doesn’t meet the default expectations of customers.”
Singer said that comes as Bankman-Fried begins making large investments in other companies in Alameda, including a $1 billion investment in a cryptocurrency mining company in Kazakhstan and a $500 million investment in an artificial intelligence company. dollars, he became disillusioned. He said he opposed many of the deals, which led to conflicts with Bankman-Fried. “I was embarrassed and ashamed of how excessive and gaudy it smelt,” he said.
But Bankman-Fried seemed fascinated by the possibility of gaining access to influential leaders and celebrities. In a memo about the K5 deal, Bankman-Fried said that if they asked K5 to “meet with Elon, Obama, Rihanna and Zuckerberg within a month, they might succeed.”
Singer described a series of private conversations with Bankman-Fried in the fall of 2022 as concerns deepened about FTX and Alameda’s fragile financial position, which he repeatedly referred to as “vulnerabilities.” He said Bankman-Fried acknowledged that FTX would not be able to return customer funds in full and was developing strategies to increase capital and reduce costs in response.
But Singer testified that despite Bankman-Fried’s admission that Alameda’s deficit at one point was as high as $13 billion, he continued to use FTX client money to make capital investments in other companies. He said that in the final days before FTX collapsed, Bankman-Fried and others gathered at his luxury apartment in the Bahamas to draft Twitter posts aimed at reassuring customers about FTX’s condition. Singer said he became suicidal as FTX neared bankruptcy.
Singer’s direct testimony under questioning by prosecutors concluded the trial on Monday, and his cross-examination will begin on Tuesday. Prosecutors said most of the case will be completed this week, with defense presentations set to begin late next week.
Separately, Bankman-Fried’s defense attorneys complained that as the defense was about to make a crucial decision on whether to allow him to testify, their client failed to take a dose of Adderall that was effective in helping him focus. But Manhattan Federal Court Judge Lewis Kaplan declined to issue any order on the issue, saying he did not have the medical expertise to determine what Bankman-Fried needed or which remedy was best.