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Former FTX Executive Nishad Singh Charged for Defrauding Investors
The US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have charged former FTX executive Nishad Singh for his active role in a “multiyear scheme to defraud equity investors in FTX.” He has agreed to a bifurcated settlement with the SEC.
According to a press release by SEC on Tuesday, February 28th, Nishad Singh, 27, the former Co-Lead Engineer of FTX, was an active participant in the scheme that unlawfully directed customer funds towards Alameda Research, which used these for its own trading activities.
Today we charged Nishad Singh, the former Co-Lead Engineer of FTX Trading Ltd., for his role in a multiyear scheme to defraud equity investors in FTX, the crypto trading platform started by Singh, Samuel Bankman-Fried, and Gary Wang.
— U.S. Securities and Exchange Commission (@SECGov) February 28, 2023
Singh’s Software Directed Customers’ Funds to Alameda
According to the SEC complaint filed in the court, Singh was an aware and active participant in all the fraudulent business practices at FTX and Alameda Research. As a leader of the engineering team at FTX, he created software code that allowed FTX customer funds to be diverted to Alameda.
The regulator alleged that even when it “became clear that Alameda and FTX could not make customers whole for the funds already unlawfully diverted,” they continued to use customers’ funds at Alameda for additional venture investments, loan repayments, and loans to SBF and executives including Singh himself.
The court filing reads:
“When prices of crypto assets plummeted in May 2022, Alameda’s lenders demanded repayment on billions of dollars of loans. Despite the fact that Alameda had, by this point, already taken billions of dollars of FTX customer assets, it was unable to satisfy its loan obligations. Bankman-Fried directed FTX to divert billions more in customer assets to Alameda […]. Ellison then used FTX’s customer assets to pay Alameda’s debts.”
In another instance in late 2021, when SBF realized that FTX was $50 million short of its $1 billion annual revenue target, he ordered Singh to transfer $50 from another entity and label that money as FTX revenue in 2021. Singh obeyed and manipulated the documentation to appear legitimate.
Even when FTX was nearing its collapse, the defendant took out approximately $6 million from FTX for personal use, “including the purchase of a multi-million dollar house and donations to charitable causes.”
SEC has charged the former FTX executive with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 193. He has agreed to a bifurcated agreement, which is awaiting court approval.
The CFTC complaint also charges Nishad Singh with similar charges that allege he was part of the scheme that recklessly used FTX customers’ funds to support their other activities. As per the complaint, Singh’s software code enabled Alameda to impermissibly access and use over $8 billion in FTX customer assets.
NEWS: Today the CFTC charged an FTX co-owner with fraud by misappropriation and aiding and abetting fraud related to digital asset commodities. Learn more: https://t.co/7unNqhgye0
— CFTC (@CFTC) February 28, 2023
Earlier on Tuesday, February 28th, he also pleaded guilty to similar charges filed by the Department of Justice (DOJ). Singh is the third SBF close associate to plead guilty and cooperate with the investigators following Gary Wang and Caroline Ellison.
