Nishad Singh, Indian-origin engineer at FTX, pleads guilty to 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 stock investors in FTX, the crypto trading platform started by Singh along with Samuel Bankman-Fried and Gary Wang.

Last December, federal authorities had accused Bankman-Fried of 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 pleaded guilty to wire 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 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 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. As FTX neared collapse, Singh withdrew about $6 million from FTX for personal use and expenses, including the purchase of a multi-million dollar house and charitable donations.

Singh, a US citizen, was chief engineer at Alameda and later at FTX. Singh resided in Hong Kong and the Bahamas from May 2019 to 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 help them with engineering projects.

Around April 2019, Singh began collaborating with Wang to build FTX, which launched in May of that year. Although working primarily as an FTX engineer as of spring 2019, Singh retained his role and title as Alameda’s chief engineer, continuing 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 an injunction against future securities law violations and civil penalties, among other penalties.

Singh has agreed to a two-part settlement, subject to court approval, in which he will be permanently enjoined from violating federal securities laws. The SEC said Singh is cooperating with the ongoing investigation.

The Commodity Futures Trading Commission’s two-count complaint accuses Singh of fraud by embezzlement and aiding and abetting fraud committed by Samuel Bankman-Fried, FTX Trading Ltd and Alameda.

Singh was a shareholder and senior executive in FTX, and was FTX’s director of engineering at the time of its collapse in November 2022.

The CFTC complaint alleges 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 expenses, and did so even after Singh knew or should have ha knew that the source of these assets was, at least in part, FTX customer assets.

Singh does not dispute his liability for the CFTC’s allegations and has agreed to the entry of a proposed consent order with respect to his liability on the allegations in the complaint, the CFTC said.

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

The alleged fraud perpetrated by Bankman-Fried is a “coax to crypto platforms that they need to comply with our laws,” Gensler said.