In the latest development to the FTX saga, the former director of engineering at the defunct cryptocurrency exchange entered a guilty plea to criminal charges on Tuesday (Feb. 28).
Nishad Singh also agreed to cooperate with the ongoing investigation into FTX co-founder Sam Bankman-Fried’s activities, admitting that he knew by the middle of last year that SBF was using customer funds without their knowledge, among other irregularities.
An SEC press release issued Tuesday (Feb. 28) said, “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 [co-founder Gary] 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.”
In a Tuesday announcement, the Commodities Futures Trading Commission (CFTC) also charged Singh with fraud, saying “Singh was responsible for creating or maintaining various undisclosed components in the code underlying FTX that, operating together with other features, granted Alameda functionalities that allowed it to misappropriate FTX customer assets. Among other things, these features in the FTX code favored Alameda and allowed it to execute transactions even when it did not have sufficient funds available, including, critically, a ‘can withdraw below borrow’ functionality that allowed Alameda to withdraw billions of dollars in customer assets from FTX.”
As reported by Reuters, “Singh, 27, pleaded guilty to one count of wire fraud, three counts of conspiracy to commit fraud, one count of conspiracy to commit money laundering, and one count of conspiracy to defraud the United States by violating campaign finance laws.”
He has agreed to surrender all proceeds from his work with FTX as part of the guilty plea. Reuters said Singh “traveled back from the Bahamas shortly after FTX imploded in November in part to assist the U.S. investigation, prosecutor Danielle Sassoon said at Tuesday’s hearing. He was released on $250,000 bond.”
In a new indictment unsealed last week, Bankman-Fried now faces 12 criminal charges.
Singh is the latest individual associated with FTX to plead guilty and agree to help prosecutors unravel the extent of the financial crimes committed by Bankman-Fried and his now-bankrupt FTX crypto exchange.
As PYMNTS reported in December, Alameda Research CEO Caroline Ellison is cooperating with authorities in the FTX crypto case, and FTX co-founder and engineering leader Gary Wang has also pleaded guilty to four charges and agreed to cooperate with the U.S. Department of Justice. Wang was released on bail, as was Ellison.
In Ellison’s case, PYMNTS also reported, “The Alameda CEO’s plea agreement says she will be deported if found not to be a U.S. citizen. While born in the U.S. to academic parents, many observers of the case have speculated that Ellison might have given up her citizenship to avoid U.S. taxes — a popular tactic by offshore crypto traders. It may leave the 28-year-old Stanford graduate open to the tax violation prosecution clause mentioned above.”
Bankman-Fried identified Ellison’s Alameda Research as the source of a $546 million loan, purportedly used to buy shares in meme stock Robinhood through a holding company called Emergent Fidelity Technologies, which itself filed for Chapter 11 bankruptcy in early February.
Both firms filed for Chapter 11 bankruptcy after the collapse of FTX.
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