A 27-year old Indian-origin engineer at a crypto asset trading platform has pleaded guilty to charges of commodities fraud.
Nishad Singh was the former co-lead engineer of FTX Trading Ltd. He is facing federal charges for his role in a multiyear scheme to defraud equity investors in FTX, the crypto trading platform started by Singh along with Samuel Bankman-Fried and Gary Wang.
In December last year, federal authorities had charged Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX.
The Securities and Exchange Commission charged Singh Tuesday. In a parallel action, the US Attorney's Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) also announced charges against Singh.
Singh entered a guilty plea as to commodities fraud and other charges in the separate, parallel action against him in the Southern District of New York.
According to the SEC's complaint, Singh 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, despite false assurances by Bankman-Fried to investors that FTX was a safe crypto asset trading platform with sophisticated risk mitigation measures to protect customer assets and that Alameda was just another customer with no special privileges.
The complaint alleges that Singh knew or should have known that such statements were false and misleading.
The complaint also alleges that Singh was an active participant in the scheme to deceive FTX's investors. As FTX neared collapse, Singh withdrew approximately $6 million from FTX for personal use and expenditures, including the purchase of a multi-million dollar house and donations to charitable causes.
Singh, a United States citizen, was the Head of Engineering at Alameda and, later, at FTX. Singh resided in Hong Kong and The Bahamas from May 2019 through November 2022.
The SEC complaint said Singh grew up in California and was a childhood friend of Bankman-Fried's brother. In 2017, Bankman-Fried and Wang founded Alameda Research LLC, a crypto asset hedge fund, and Bankman-Fried invited Singh to assist them with engineering projects.
Around April 2019, Singh began working with Wang to build FTX, which launched in May of that year. Although he worked primarily as an FTX engineer beginning in the spring of 2019, Singh retained his role and title as Alameda's Head of Engineering, and continued to work on Alameda projects.
Singh's responsibilities and profile within both Alameda and FTX grew significantly over time, and he ultimately held the role and title of Head of Engineering at both companies.
The SEC's complaint seeks an injunction against future securities law violations and civil penalty among other penalties.
Singh has consented to a bifurcated settlement, which is subject to court approval, under which he will be permanently enjoined from violating the federal securities laws. SEC said Singh is cooperating with its ongoing investigation.
The Commodity Futures Trading Commission's two-count complaint charges Singh with fraud by misappropriation and with aiding and abetting fraud committed by Samuel Bankman-Fried, FTX Trading Ltd and Alameda.
Singh was a shareholder and senior executive of FTX, and was FTX's Director of Engineering at the time of its collapse in November 2022.
The CFTC complaint charges that Singh personally misappropriated millions of dollars of assets, including FTX customer assets, through poorly documented "loans" from Alameda and other improper withdrawals of funds from FTX for various personal expenditures, and did so even after Singh knew or should have known the source of those assets was, at least in part, FTX customer assets.
Singh does not contest his liability on the CFTC's claims, and has agreed to the entry of a proposed consent order of judgment as to his liability on the charges in the complaint, CFTC said.
SEC Chairman Gary Gensler had said in December last year that Bankman-Fried “built a house of cards” on a foundation of deception while telling investors that it was one of the safest buildings in crypto.
The alleged fraud committed by Bankman-Fried is a “clarion call to crypto platforms that they need to come into compliance with our laws,” Gensler had said.
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