SEC, CFTC Charge FTX's Singh With Fraud Following Criminal Plea
The U.S. Securities and Exchange Commission and Commodity Futures charged former FTX director of engineering Nishad Singh with fraud allegations on Tuesday, following the ex-FTX executive's guilty plea to similar charges in a federal courthouse.
The federal regulators both alleged that FTX lied to the public about its degree of separation from Alameda Research, a prop trading shop founded by FTX's Sam Bankman-Fried, and the companies commingled corporate and customer funds and used these funds for various purposes, including its own investments and trading activities.
According to the CFTC complaint, Singh once shifted $8 billion in Alameda liabilities to a customer account to "prevent Alameda from paying interest on its large outstanding balance."
Other allegations include claims that Singh was among a group of FTX executives who workshopped Bankman-Fried's tweets claiming FTX was okay and its customers could be made whole just prior to FTX's filing for bankruptcy.
The SEC, for its part, alleged that Singh moved funds around at Bankman-Fried's request to make it appear that FTX generated more revenue than it actually did in 2021.
"In late 2021, when Bankman-Fried realized that FTX was $50 million short of his goal of earning one billion dollars in annual revenue, he instructed Singh to transfer funds from another entity that he controlled, and to falsely characterize the $50 million as revenue that FTX earned throughout 2021," the SEC complaint said. "Singh then backdated a series of fraudulent transfers, and later lied to auditors about the transfers and created false documentation to support those lies. He did so knowing that this information would later also be presented to investors and potential investors."
In a statement, SEC Director of Enforcement Gurbir Grewal 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."
Similarly, CFTC Chief Counsel and Deputy Enforcement Director 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."
UPDATE (Feb. 28, 2023, 18:30 UTC): Adds additional detail.