Nishad Singh, 27, was the co-lead engineer at FTX Trading Ltd. The crypto asset trading platform engineer of Indian descent entered a guilty plea to charges of commodities fraud.
He is being prosecuted by the federal government for his participation in a long-running scam to defraud equity investors in FTX, the cryptocurrency trading platform Singh founded with Samuel Bankman-Fried and Gary Wang.
Federal officials accused Bankman-Fried of coordinating a plot to swindle equity investors in FTX in December of last year.
Singh was accused by the Securities and Exchange Commission on Tuesday. In a related move, Singh was also charged by the Commodity Futures Trading Commission (CFTC) and the US Attorney’s Office for the Southern District of New York.
In the separate, parallel case brought against Singh in the Southern District of New York, Singh entered a guilty plea for commodities fraud as well as other offences.
Despite misleading claims by Bankman-Fried to investors that FTX was a secure crypto asset trading platform with sophisticated risk mitigation measures to protect customer assets and that Alameda was just another customer with no special privileges, Singh allegedly created a software code that allowed FTX customer funds to be diverted to Alameda Research, a crypto hedge fund owned by Bankman-Fried and Wang.
According to the complaint, Singh knew or should have known that these representations were deceptive and fraudulent.
Singh is charged with actively participating in the plot to defraud FTX’s investors, according to the complaint. Singh withdrew about $6 million from FTX as the company was on the verge of bankruptcy for personal use, including the purchase of a multimillion-dollar home and payments to charitable organisations.
Singh, a citizen of the United States, oversaw engineering at Alameda before moving on to FTX. Singh lived in The Bahamas and Hong Kong between May 2019 and November 2022.
According to the SEC complaint, Singh was Bankman-Fried’s brother’s childhood buddy and grew up in California. In 2017, Bankman-Fried and Wang established the crypto asset hedge fund Alameda Research LLC, and Bankman-Fried invited Singh to help them with engineering tasks.
Singh and Wang began building FTX in April of that year, and it premiered in May. Beginning in the spring of 2019, Singh worked mostly as an FTX engineer, but he kept his position as Alameda’s Chief of Engineering and continued to work on Alameda projects.
Over time, Singh’s roles and profile at both Alameda and FTX expanded dramatically, and he eventually held the position and title of Head of Engineering at both businesses.
In addition to other fines, the SEC’s action asks for an injunction against future violations of the securities laws.
Singh has agreed to a split settlement, which must be approved by the court, under which he will be barred from breaking the federal securities laws indefinitely. Singh is assisting SEC’s continuing investigation, according to SEC.
Singh is accused of fraud by misappropriation and of aiding and abetting fraud by Samuel Bankman-Fried, FTX Trading Ltd., and Alameda in the two-count complaint filed by the Commodity Futures Trading Commission.
When FTX failed in November 2022, Singh was a stakeholder, a senior executive, and the company’s director of engineering.
According to the CFTC complaint, Singh allegedly misappropriated millions of dollars in assets, including those belonging to FTX customers, through poorly documented “loans” from Alameda and other unauthorised withdrawals from FTX for a variety of personal expenses.
Singh is accused of doing this even after knowing or having a reasonable expectation that the source of those assets was, at least in part, FTX customer assets.
Singh has agreed to the entry of a proposed consent order of judgement as to his liability on the accusations in the complaint and does not fight his liability on the CFTC’s claims, according to the CFTC.
Gary Gensler, the chairman of the SEC, claimed in December of last year that Bankman-Fried “built a house of cards” while convincing investors that it was one of the safest structures in cryptocurrency.
The alleged fraud by Bankman-Fried is a “clarion call to crypto platforms that they need to comply with our laws,” Gensler said.
