After co-founder Gary Wang and Alameda Research CEO Caroline Ellison, Nishad Singh becomes the third high-profile FTX executive to plead guilty to criminal charges and snitch on founder Sam Bankman-Fried.
According to documents unsealed by the Manhattan Prosectors’ Office on Tuesday, the former Director of Engineering at FTX has pleaded guilty to six counts of fraud and conspiracy and agreed to cooperate with authorities in their investigation into the $32 billion bankruptcy case dubbed the “biggest financial fraud scheme ever orchestrated in American history”.
In January, Singh met with federal prosecutors at the Southern District of New York Attormey’s Office in a proffer session to seek out a cooperation deal in exchange for limited immunity. However, a proffer session will only lead to a cooperation deal after prosecutors find out how valuable the shared information is to the investigation.
Singh, hired by Bankman-Fried’s private hedge fund Alameda Research in 2017, two years before the launch of FTX, had a close relationship with the founder and even lived with the disgraced billionaire in his $40 million penthouse apartment in the Bahamas, where FTX Group is headquartered. The software engineer was responsible for writing the code that the crypto exchange was built on.
Singh was prosecuted by federal authorities for contributing to the collapse of FTX and misleading auditors by providing them with wrong information about the company’s finances. Prosecutors are questioning the executive for involvement in FTX’s political campaign financing activities. Last week, SBF was charged with campaign financing violations along with three counts of bank fraud, derivatives fraud, and operating an unlicensed money-transmitting business. This brings the total number of criminal charges against the founder to 12.
According to reports, Singh was part of the Alameda group that made political contributions to Democratic Party candidates and political action committees (PAC) using company funds. However, the donations were reported to the Federal Election Commission (FEC) as being made by individuals under different names, a clear violation of campaign financing laws.
Singh is accused of donating $9.3 million to various Democrat candidates and committees between 2020 and 2022, with the largest contribution coming in the latest election cycle when he shelled out $8 million. According to Alameda’s bankruptcy filings, the former director of engineering took out millions of dollars in loans from the crypto hedge fund, and donated $1 million to Mind The Gap, a PAC started by Bankman-Fried’s mother Barbara Fried – a retired law professor at the Stanford University.
The Securities and Exchange Commission (SEC) filed a separate civil lawsuit against Singh, accusing him of creating the software that facilitated FTX’s siphoning of customers’ assets without their knowledge from the exchange to trading firm Alameda Research. All the while, the exchange assured customers its platform was a safe space to trade crypto tokens that also leveraged “sophisticated” risk mitigation methods to protect their assets. FTX also claimed that Alameda was just another customer without any special privileges.
However, when both companies filed for Chapter 11 bankruptcy protection in November, it was revealed that FTX diverted more than $10 billion in customer and investor funds to Alameda – a company co-founded by SBF and run by his girlfriend Caroline Ellison – to be traded or cashed out for personal gains. The SEC alleges that Singh knew what was taking place and was aware that FTX was misleading customers by making false statements about the status of their funds.
The complaint also states that Singh withdrew approximately $6 million from FTX near its eventual collapse and used the funds for personal expenditures.
In December, Gary Wang and Caroline Ellison pleaded guilty to federal fraud charges filed by the SEC and the Commodities and Futures Trading Commission (CFTC). The duo agreed to cooperate in the investigation in exchange for leniency. Meanwhile, Bankman-Fried pleaded not guilty to criminal and civil charges against him and is currently under house arrest at his parent’s home in Palo Alto, California. The con man is awaiting trial in the case scheduled for October 3, 2023. If found to be guilty, he is looking at more than 100 years behind bars.
According to the plea agreement unsealed on Tuesday, federal prosecutors will recommend a reduced sentence for the crimes committed by Singh in exchange for his cooperation. The former FTX director will be released on a $250,000 bond.
FTX, once the world’s third-largest cryptocurrency exchange by trading volume, shut down operations in November and locked up the funds of 9 million users. The company owes $8.8 billion in liabilities to over a million creditors, including customers. Earlier this week, FTX Japan, the Japanese subsidiary of the exchange, allowed customers to withdraw all their balances.
The FTX debacle led to a chain of events that resulted in the subsequent bankruptcies of crypto lenders Genesis Global Capital and BlockFi, who had significant exposure to the firm. The exchange’s international customers are yet to be able to withdraw their assets as financial restructuring and bankruptcy procedures are ongoing.