FTX’s Nishad Singh pleaded guilty to US criminal charges on Tuesday and agreed to cooperate with the investigation into the former chief executive of FTX, Sam Bankman-Fried (SBF), who is accused of committing one of the largest financial frauds in history.
Just last month, US prosecutors expanded their case against SBF, adding four counts, including conspiracy to commit bank fraud, to his already lengthy chargesheet, raising it to 12 counts of criminal offenses. The move brings the total charges against the one-time crypto billionaire to 12.
Among other charges, SBF is accused of siphoning off billions from customers’ funds at FTX, as well as misleading investors and lenders. He has pleaded not guilty to all of these charges and will be appearing in court to face several charges at some point in the future. SBF’s court date is set for Oct. 2, 2023. He is facing up to 115 years in prison if found guilty.
For now, SBF is released on a $250 million bail. According to prosecutors, SBF raised at least $1.8 billion from investors.
SBF’s fall from grace and his extradition from the Bahamas at the end of last year sent a shockwave through the crypto sector, resulting in wiping out billions of dollars from the market. The 30-year-old lost his billionaire status overnight after his trading platform collapsed.
Singh is now the third member of SBF’s inner circle to agree to cooperate with prosecutors in their case against him. Former executives Carolyn Allison and Zhixiao “Gary” Wang have both pleaded guilty before on charges related to fraud.
“Today’s guilty plea underscores once again that the crimes at FTX were vast in scope and consequence,” said Damian Williams, US attorney for the Southern District of New York. “They rocked our financial markets with a multibillion-dollar fraud. And they corrupted our politics with tens of millions of dollars in illegal straw campaign contributions. These crimes demand swift and certain justice, and that is exactly what we are seeking in the Southern District of New York.”
Meanwhile, Singh’s lawyers, Andrew Goldstein and Russell Capone, said in a statement that the former FTX executive apologizes.
“Nishad is deeply sorry for his role in this and has accepted responsibility for his actions. He wants to do everything he can to make things right for victims, including by assisting the government to the best of his ability in this case,” said the attorneys.
Nishad Singh’s Role in FTX
Nishad Singh is a 27-year-old Indian-born member of SBF’s inner circle, running his FTX cryptocurrency empire. He served as director of engineering for the now-bankrupt crypto exchange FTX and saw an extraordinary turnaround of fortunes in the face of mounting solvency issues.
Talking about the FTX issue, Singh said that it was in mid-2022 when he learned that Alameda Research was borrowing billions in customer funds from FTX. Alameda Research is a hedge fund, cryptocurrency trading platform, and a sister firm of FTX. Alameda Research reportedly owes FTX $10 billion, while the crypto exchange is believed to have more than a million creditors.
By September, two months before FTX filed for Chapter 11 bankruptcy, it was clear that Alameda was not in a position to pay back these funds. Singh claimed that he had manipulated FTX’s revenues at SBF’s request in order to make the company look a little nicer to investors.
“I am unbelievably sorry for my role in all of this,” said Singh adding that he will be forfeiting proceeds from the scheme. Bankruptcy records indicate Singh received $543 million in loans from Alameda.
Singh has pleaded guilty to six felony counts, including wire fraud, conspiracy to commit fraud, conspiracy to commit money laundering, and conspiracy to defraud the US by violating campaign finance laws, according to Reuters. For these charges, he is facing a maximum sentence of 75 years. He has been released on a personal recognizance bond of $250,000.
Singh was one of the nine roommates in the 30-year-old SBF’s lavish penthouse in the Bahamas, which he lived in and worked out of together, according to Coindesk report. Singh was also close friends with SBF’s younger brother during high school, SBF wrote in a blog post that has since been taken down.
According to his LinkedIn profile, Singh attended the Crystal Springs Uplands School in California and graduated magna cum laude from UC Berkeley in 2017 with a degree in electrical engineering and computer science.
Prior to joining Alameda Research in December 2017, he was a software engineer at Facebook, spending five months in a junior-level role. About two years after Alameda, Singh took on the role of director of engineering at FTX in April 2019.
Political Donations to Gain Influence
According to prosecutors, SBF and his allies abused customers’ accounts on FTX in order to boost business operations for Alameda Research, invest in ventures, enrich themselves, and attempt to purchase influence with US politicians.
The indictment alleged that Singh was chosen as a frontman for the donations from left-leaning groups. New York State election records show that Singh made a $107,000 contribution to the New York State Democratic Committee on Oct. 28, 2022.
Singh has admitted making political donations under his name to political candidates and political action committees using funds from Alameda Research without providing details of the donations. According to The Wall Street Journal, he claimed that these donations were intended to strengthen FTX’s and SBF’s political clout.
Singh added that he agreed with the positions of those he donated to but did not choose the candidates. He contributed $8 million to Democratic political action committees and campaigns through the 2022 election cycle, according to OpenSecrets.
In an indictment against SBF that was unsealed last week, prosecutors further alleged that over 300 political donations were made to attempt to influence legislation and regulations that were beneficial to the company. The donations were made under the names of two employees at FTX, identified in the indictment as CC-1 and CC-2, which, based on federal and state election records, point to Nishad Singh and Ryan Salame, respectively.
Prosecutors said these donations were illegal because they were made using a “straw” donor or funds from a corporation.
SEC Files Civil Complaint
On the same day Singh entered a guilty plea, the US Securities and Exchange Commission (SEC) filed civil complaints against him for his role in the years-long scheme to defraud equity investors in FTX.
The agency said that Singh is cooperating with an ongoing investigation by the SEC into other securities laws violations as well as into other entities and individuals related to the alleged misconduct.
In parallel actions, the United States Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) also announced charges against Singh. He has agreed to settle the matter with the CFTC.
According to the SEC’s complaint, Singh created the software code allowing the funds of FTX customers to be transferred to Alameda Research, despite false assurances to investors from SBF that FTX was a secure cryptocurrency trading platform with elaborate risk-mitigation measures in place to protect customers assets, and that Alameda was merely another client without any special privileges. The complaint alleged that Singh knew, or should have known, that those statements were false and misleading.
The complaint further alleges that Singh was an active participant in the deception of FTX investors. In addition, according to the complaint, when FTX was close to collapsing, Singh withdrew about $6 million from FTX for his own use and expenses, including a multimillion-dollar home purchase and donations to charity.
“We allege that this was a fraud, pure and simple: while on the one hand, FTX touted its supposed effective risk mitigation measures to investors, on the other, Mr. Singh and his co-defendants were stealing customer funds using software code Mr. Singh helped create,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
He then went on to say that: a mainstay of our securities laws is that when companies and their representatives choose to talk about a subject, they cannot lie to investors about matters central to their investment decisions. “That’s true when it comes to crypto asset securities, just as it is in connection with any other securities,” said Grewal.
The SEC’s complaint charges Singh with violating anti-fraud provisions and seeks a preliminary injunction to prevent future securities laws violations; an injunction on conduct, prohibiting Singh from participating in the issuance, purchase, offering, or sale of any securities, other than his personal accounts; disgorgement of his ill-gotten gains; a civil penalty; and barring him as an officer and director.
A judge would have to sign off on this settlement and determine how much in penalties and disgorgement Singh would have to pay, as well as the duration of the officer and director bars.
According to the authorities, Singh has not challenged his culpability, and the agency is seeking compensation, a refund, and permanent bans on transactions.