In a not-at-all-shocking turn of events, Nishad Singh, the former Co-Lead Engineer of FTX Trading Ltd., has been charged by the Securities and Exchange Commission (SEC) for his role in a multiyear scheme to defraud equity investors in FTX, the crypto trading platform he helped create with Samuel Bankman-Fried and Gary Wang.
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 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.
The complaint alleges that Singh knew or should have known that such statements were false and misleading, and was an active participant in the scheme to deceive FTX’s investors.
Even as it became clear that Alameda and FTX could not make customers whole for the funds already unlawfully diverted, Bankman-Fried, with the knowledge of Singh, directed hundreds of millions of dollars more in FTX customer funds to Alameda, which were used for additional venture investments and loans to Bankman-Fried, Singh, and other FTX executives.
Moreover, as FTX neared collapse, Singh withdrew approximately $6 million from FTX for personal use and expenditures, including the purchase of a multi-million dollar house and donations to charitable causes.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said: “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 Mr. Singh and his co-defendants were stealing customer funds using software code Mr. Singh helped create.”
Singh has consented to a bifurcated settlement, which is subject to court approval, under which he will be permanently enjoined from violating the federal securities laws, a conduct-based injunction that prohibits Singh from participating in the issuance, purchase, offer, or sale of any securities, except for his own personal accounts; disgorgement of his ill-gotten gains; a civil penalty; and an officer and director bar.
