A 27-year-old Indian-born engineer working at a crypto-asset trading platform has pleaded guilty to commodity 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 of FTX, the crypto trading platform launched by Singh with Samuel Bankman-Fried and Gary Wang.
In December last year, federal authorities accused Bankman-Fried of orchestrating a scheme to defraud FTX stock investors.
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 commodity fraud and other charges in a 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 Bankman-Fried’s false assurances to investors. that FTX was a safe crypto. asset exchange 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 these statements were false and misleading.
The complaint also alleges that Singh actively participated in the scheme to deceive FTX investors. As FTX neared collapse, Singh withdrew approximately $6 million from FTX for personal use and expenses, including the purchase of a multi-million dollar home and donations to charitable causes.
Singh, a US citizen, was the head of engineering 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 with engineering projects.
Around April 2019, Singh started working with Wang to build FTX, which was launched in May of the same year. Although he worked primarily as an FTX engineer beginning in the spring of 2019, Singh retained his role and title as Alameda’s Chief Engineering Officer and continued to work on Alameda projects.
Singh’s responsibilities and profile at Alameda and FTX grew significantly over time, and he eventually held the position and title of Engineering Manager at both companies.
The SEC’s complaint seeks an injunction against future violations of securities law and civil penalties, among other penalties.
Singh agreed to a bifurcated settlement, which is subject to court approval, under which he will be permanently prohibited from violating federal securities laws. The SEC said Singh is cooperating with its ongoing investigation.
The Commodity Futures Trading Commission’s two-count complaint accuses Singh of embezzlement fraud and complicity in fraud by Samuel Bankman-Fried, FTX Trading Ltd and Alameda.
Singh was a shareholder and senior executive of FTX, and was chief engineering officer of FTX at the time of its collapse in November 2022.
CFTC complaint accuses Singh of personally misappropriating millions of dollars in assets, including FTX client assets, through poorly documented Alameda “loans” and other improper withdrawals of funds from FTX for various personal expenses, even after Singh knew or should have known that the source of those assets were, at least in part, the assets of FTX clients.
Singh does not contest his liability on the CFTC’s claims and has accepted entry for a proposed consent judgment order as to his liability on the charges in the complaint, the CFTC said.
SEC Chairman Gary Gensler said in December last year that Bankman-Fried “built a house of cards” based on the deception while telling investors it was the one of the most secure buildings in crypto.
The alleged fraud committed by Bankman-Fried is a “clear call to crypto platforms that they need to comply with our laws,” Gensler had said.
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