Nishad Singh, a Former FTX Executive, Was Accused by the SEC With Defrauding Investors

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Last Updated on March 1, 2023 by Bitfinsider

The Securities and Exchange Commission (SEC) claimed that a former head of engineering at FTX was “an active participant” in a scheme to defraud FTX’s investors and even went so far as to withdraw millions from FTX for his own use.

According to an SEC statement, Nishad Singh was charged on Tuesday for “his role in a multiyear scheme” to defraud investors on the cryptocurrency exchange FTX. In November, that exchange sought bankruptcy protection, and Sam Bankman-Fried, its former CEO, is now being prosecuted on both civil and criminal counts.

Singh was “an active participant,” according to the SEC, in a scheme to defraud FTX’s stockholders. Singh even went so far as to take about $6 million out of FTX for his own use, which he spent on a “multi-million dollar house and donations to charitable organizations.”

Regarding the SEC allegations, Singh agreed to a “bifurcated settlement,” which is pending judicial approval. Singh allegedly entered a guilty plea to various criminal charges brought by federal prosecutors earlier on Tuesday.

Singh was also accused by the Commodity Futures Trading Commission of “fraud by misappropriation and aiding and abetting fraud.” Singh agreed to the entry of a suggested consent order of judgment as to his liability on the charges in the complaint, according to a statement from the commodities regulator. Singh did not dispute the agency’s assertions.

According to the SEC, Singh also wrote software code that permitted FTX customer money to be transferred to Alameda Research, a cryptocurrency hedge fund established by Gary Wang and Bankman-Fried. According to a statement from the SEC, this was accomplished ‚Äúdespite 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.”

According to the agency, Singh knew or ought to have known that those assertions were false. Bankman-Fried instructed Singh to “transfer funds from another entity that he controlled, and to falsely characterize the $50 million as revenue that FTX earned throughout 2021” after realizing that FTX was $50 million short of his $1 billion yearly revenue target at one point in 2021. The SEC alleges that Singh “then backdated a series of fraudulent transfers, lied to auditors about the transfers, and produced false documentation to support those lies.”

Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement accompanying the news of the complaint, “We allege that this was fraud, pure and simple: while on the one hand FTX touted its supposed effective risk mitigation measures to investors, on the other hand Mr. Singh and his co-defendants were stealing customer funds using software code Mr. Singh helped create.”

In parallel proceedings, charges against Singh were also revealed by the U.S. Attorney’s Office for the Southern District of New York. In a court proceeding on Tuesday, Singh pleaded guilty to six criminal charges filed by SDNY prosecutors.

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