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FTX’s Former Head of Engineering Testifies on Crypto Company’s Collapse

In a Manhattan federal court, Nishad Singh, the former head of engineering at FTX, provided a detailed account of the events leading to the collapse of the cryptocurrency company. Singh expressed concerns about FTX founder Sam Bankman-Fried’s extravagant spending habits and the financial implications for the company.

Despite Singh’s initial worries, it was only in September 2022, two months before FTX filed for bankruptcy, that he discovered a significant deficit in customer funds, referring to it as “a hole.” Bankman-Fried considered shutting down FTX’s sister company, Alameda Research, to address the situation, but the company owed too much money to customers to take that route.

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“Don’t Worry About It”: Concerns Over Financial Debt

Singh expressed his concerns about the increasing debt and its impact on the company’s financial stability. Allegedly, Bankman-Fried dismissed Singh’s worries, stating that it was not his responsibility and advised him not to worry about it.

Furthermore, Singh discovered that Bankman-Fried had committed to endorsement deals worth over $1 billion, despite the existing debt. Singh regarded this excessive spending as unnecessary and perceived it as a substantial financial drain.

Additionally, Singh allowed political donations, including those from executives and Bankman-Fried’s brother’s political action committee, to pass through his personal account, considering it to be advantageous from a public image perspective. However, he emphasized that his involvement was minimal, stating that his role was merely to click a button.

Regarding financial manipulation, Singh testified that Bankman-Fried instructed him to backdate several transactions in 2021, aiming to boost FTX’s revenue from $950 million to $1 billion. Singh also claimed that Bankman-Fried requested him to transfer his personal Serum tokens onto Alameda Research’s balance sheet to disguise the extent of the alleged fraud. However, Singh refused to comply with this request.

FTX’s Collapse: Bitter Disputes and Misleading Communication

As customers began to withdraw their funds en masse on November 6th, a meeting was held among FTX and Alameda Research employees at The Albany, an employee penthouse funded by Alameda Research. Attendees included Bankman-Fried, former Alameda Research CEO Caroline Ellison, FTX CEO Ryan Salem, and other employees. The purpose of the meeting was to navigate the dire situation confronting the companies.

Singh highlighted disagreements and conflicts among the founder and executives. One area of contention was whether to issue a misleading tweet claiming FTX was “solvent or well-capitalized” in an attempt to alleviate market concerns. Singh expressed his strong disapproval of this deceptive approach.

Citing his deep emotional distress, Singh revealed his dismay towards Daniel Friedberg, FTX’s head lawyer, who had blamed Singh, Chief Technology Officer Gary Wong, and Bankman-Fried for the company’s collapse. The lack of accountability and the blame game played by Alameda and FTX executives severely affected Singh’s mental well-being, leading to suicidal thoughts.

Singh’s testimony, succinct and compelling, is expected to play a critical role in the prosecution’s case. It follows testimonies from other executives involved in Bankman-Fried’s cryptocurrency empire, including Ellison and Wang.

Bankman-Fried’s Prescription Issue

During court proceedings, Bankman-Fried’s attorney requested an adjournment to allow the defendant to access his Adderall prescription. However, the prosecution objected, revealing that the physician prescribing Adderall to Bankman-Fried had a history of liberally prescribing the medication, potentially to patients who did not require it.

Judge Kaplan ultimately rejected the defense’s request to adjourn the court session.

Singh is testifying under a cooperation agreement with the U.S. government, potentially facing a maximum prison sentence of 75 years.

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