Nishad Singh, Indian engineer at FTX, pleads guilty to fraud charges

New York:

A 27-year-old engineer of Indian descent at a crypto-asset trading platform has pleaded guilty to commodities fraud charges.

Nishad Singh was the former co-lead engineer of FTX Trading Ltd. He faces federal charges for his role in a multi-year scheme to defraud equity investors in FTX, the crypto trading platform that Singh co-founded with Samuel Bankman-Fried and Gary Wang.

Last December, federal authorities charged Bankman-Fried with orchestrating a scheme to defraud equity investors in FTX.

The Securities and Exchange Commission charged Singh on 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 to commodity fraud and other charges in the separate, parallel action against him in the Southern District of New York.

According to the SEC complaint, Singh created software code that allowed FTX client funds to be diverted to Alameda Research, a crypto hedge fund owned by Bankman-Fried and Wang, despite false assurances from Bankman-Fried to investors that FTX was a safe cryptocurrency . asset trading platform with advanced risk mitigation measures to protect client assets and that Alameda was just another client 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 defraud FTX’s investors. When FTX nearly collapsed, Singh withdrew approximately $6 million from FTX for personal use and expenses, including the purchase of a multi-million dollar home and charitable donations.

Singh, a US citizen, was Head of Engineering at Alameda and later at FTX. Singh lived in Hong Kong and the Bahamas from May 2019 to November 2022.

Singh grew up in California and was a childhood friend of Bankman-Fried’s brother, according to the SEC complaint. In 2017, Bankman-Fried and Wang founded Alameda Research LLC, a crypto asset hedge fund, and Bankman-Fried invited Singh to help them with tech projects.

Around April 2019, Singh started collaborating with Wang to build FTX, which launched in May of that year. While primarily working as an FTX engineer as of Spring 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, eventually holding the role and title of Head of Engineering at both companies.

The SEC’s complaint seeks, among other things, an injunction against future violations of securities laws and civil fines.

Singh has agreed to a split settlement, which is subject to court approval, under which he will be permanently ordered to violate federal securities laws. SEC said Singh is cooperating with the ongoing investigation.

The Commodity Futures Trading Commission’s bipartisan complaint accuses Singh of fraud by embezzlement and complicity in 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 accuses Singh of personally embezzling millions of dollars in assets, including assets of FTX clients, through poorly documented “loans” from Alameda and other improper withdrawals of funds from FTX for various personal expenses, and did so even after Singh knew or should have known that the source of those assets was known, at least in part, to be FTX client assets.

Singh does not dispute his liability for the CFTC’s claims and has agreed to enter a proposed consent order regarding his liability for the allegations in the complaint, CFTC said.

SEC Chairman Gary Gensler had said last December that Bankman-Fried was “building a house of cards” based on deception, while telling investors it was one of the safest buildings in crypto.

The alleged fraud perpetrated by Bankman-Fried is a “sound signal to crypto platforms to abide by our laws,” Gensler had said.