SEC and CFTC charge FTX co-founder Nishad Singh for code, luxury house, and charity causes
“A pillar of our securities laws is that when companies and their representatives decide to speak on an issue, they can’t lie to investors on matters that are core to their investment decisions.”
The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have brought charges against Nishad Singh, the former Co-Lead Engineer of FTX Trading, as the number of defendants widens.
The SEC charges Singh with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 for his role in a multiyear scheme to defraud equity investors in FTX.
The CFTC is bringing two-count complaint charges against Singh: fraud by misappropriation and aiding and abetting the fraud committed by Samuel Bankman-Fried, FTX, and Alameda Research.
Singh is one of the FTX co-founders, along with Samuel Bankman-Fried and Gary Wang. He was also a shareholder and senior executive of FTX, and was FTX’s Director of Engineering at the time of its collapse in November 2022.
Both the SEC and CFTC have previously brought charges against Bankman-Fried, FTX, Alameda, FTX Co-Founder Gary Wang, and Alameda Co-CEO Caroline Ellison for the alleged fraudulent scheme that caused over $8 billion in customer losses.
“Fraud, pure and simple”, says SEC
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.
In addition, the complaint alleges that Singh knew or should have known that statements defending that Alameda was treated as a regular customer were false and misleading.
The SEC also accuses Singh of participating in the scheme to deceive FTX’s investors, which 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.
In addition, Nishad Singh allegedly 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, as the exchange neared collapse.
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. A pillar of our securities laws is that when companies and their representatives decide to speak on an issue, they can’t lie to investors on matters that are core to their investment decisions. That’s true when it comes to crypto asset securities, just as it is in connection with any other securities.”
CFTC sues Nishad Singh to protect U.S. digital commodity markets
CFTC’s Division of Enforcement Principal Deputy Director and Chief Counsel Gretchen Lowe, said: “Today’s filing reflects the CFTC’s commitment to protecting the U.S. digital commodity markets. Today’s filing also includes a concession of liability by an individual who, as charged, engaged in and aided significant violations of the Commodity Exchange Act and CFTC regulations.”
The CFTC alleged that 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.
The defendant also stands accused of personally misappropriating millions of dollars of assets, including FTX customer assets, through poorly documented “loans” from Alameda and other improper withdrawals of funds from FTX for various personal expenditures, and did so even after Singh knew or should have known the source of those assets was, at least in part, FTX customer assets.