Former FTX Engineer Charged With Fraud By SEC
The former co-lead engineer of FTX Trading Ltd., Nishad Singh, has been charged by the Securities and Exchange Commission (SEC) for his alleged role in a multiyear scheme to defraud equity investors in FTX. FTX is a crypto trading platform that was started by Singh along with Samuel Bankman-Fried and Gary Wang. Investigations into other securities law violations and into other entities and persons relating to the alleged misconduct are ongoing.
Today we charged Nishad Singh, the former Co-Lead Engineer of FTX Trading Ltd., for his role in a multiyear scheme to defraud equity investors in FTX, the crypto trading platform started by Singh, Samuel Bankman-Fried, and Gary Wang.
— U.S. Securities and Exchange Commission (@SECGov) February 28, 2023
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. This was done 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 and that Alameda was just another customer with no special privileges. The complaint alleges that Singh knew or should have known that such statements were false and misleading.
Fraudulent Conduct by FTX Co-Founder and Engineer
The complaint also alleges that Singh was an active participant in the scheme to deceive FTX’s investors. The complaint further alleges that, 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.
“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,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
The SEC’s complaint charges Singh with violating the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934. The SEC’s complaint seeks an injunction against future securities law violations, disgorgement of his ill-gotten gains, a civil penalty, and an officer and director bar.
Charges from Multiple Agencies
In a parallel action, the U.S. Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) announced charges against Singh.
Singh is cooperating with the SEC’s ongoing investigation, which is being conducted by the Crypto Assets and Cyber Unit. The SEC’s litigation will be led by Amy Burkart and David D’Addio and supervised by Ladan Stewart and Olivia Choe. The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the FBI, and the CFTC.
