Feb 28, 2023
Bankman-Fried’s inner circle continues to crumble with Singh guilty plea
Our merger with U.S. Bitcoin would have happened whether Bitcoin and FTX collapsed or not: Hut 8 CEO
Former FTX engineering chief Nishad Singh pleaded guilty to fraud as part of a cooperation deal with prosecutors, the third member of the collapsed cryptocurrency exchange’s inner circle to flip against co-founder Sam Bankman-Fried.
Singh said at a hearing on Tuesday that he was “unbelievably sorry for my role in this and the harm it caused.” He admitted he knew for months that Alameda Research, the exchange’s trading arm, was borrowing billions of dollars in funds from FTX without customers’ knowledge.
“I took actions to make it appear that FTX’s revenues were higher than they were and provided that information to auditors,” Singh told the court, wearing a dark suit and white dress shirt. “I knew my conduct was wrong.”
Singh, 27, pleaded guilty to six criminal counts, including wire fraud, conspiracy to commit securities fraud and a campaign finance law violation, in Manhattan federal court after making his cooperation agreement with federal prosecutors in the Southern District of New York.
He is the third close associate of Bankman-Fried to plead guilty and sign on as a cooperating witness for the government. Gary Wang and Caroline Ellison pleaded guilty last year to charges in connection to their roles at FTX and Alameda Research and are working with the government. Singh had been negotiating his deal since taking part in a proffer session last month, Bloomberg previously reported.
A representative for Bankman-Fried declined to comment on Singh’s plea.
'KNEW IT WAS WRONG'
At Tuesday’s plea hearing, Singh told the judge he wasn’t aware, at the time that campaign donations were being made in his name, that it was illegal. But he said he “knew it was wrong.” Under questioning by the judge, he agreed he had disregarded “a substantial risk” that his actions violated the law.
“Nishad is deeply sorry for his role in this and has accepted responsibility for his actions,” Singh’s lawyers, Andrew D. Goldstein and Russell Capone, said in a statement. “He wants to do everything he can to make things right for victims, including by assisting the government to the best of his ability in this case.”
Also on Tuesday, the U.S. Securities and Exchange Commission and the US Commodity Futures Trading Commission filed civil lawsuits against Singh. Both agencies alleged that he created software code that allowed FTX customer assets to be transferred to Alameda.
According to the SEC complaint, Singh played an active role in deceiving investors and was aware that Bankman-Fried had directed hundreds of millions of dollars of customer funds to Alameda to be used for loans and venture investments, even as it became clear there was a shortfall because of client money already sent to the hedge fund.
The SEC said Singh withdrew about US$6 million from FTX, as the platform neared its implosion, for personal use and expenses, including to buy a multimillion-dollar home and to donate to charity. The CFTC accused him of personally misappropriating millions of dollars of assets, including customer funds, through poorly documented loans from Alameda and improper withdrawals from FTX.
'FRAUD, PURE AND SIMPLE'
“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,” Gurbir Grewal, director of the SEC’s Division of Enforcement, said in a statement.
The SEC said Singh is cooperating with its ongoing investigation into the alleged fraud at FTX.
Singh has provided prosecutors with a window into the political donations side of the FTX operation. He had given more than US$9.3 million to Democratic candidates and committees since 2020, according to campaign finance filings. In the last election cycle, he donated US$8 million. Among the largest recipients was Mind the Gap, a political action committee founded by Bankman-Fried’s mother that received US$1 million from Singh in April 2021.
Last week federal prosecutors filed four additional charges against Bankman-Fried, accusing him of using FTX executives to make millions of dollars of political donations in hopes of influencing crypto regulation.
1/1,000TH OF BANKMAN-FRIED’S BOND
Damian Williams, the U.S. attorney for the Southern District, said Singh’s guilty plea underscored “once again that the crimes at FTX were vast in scope and consequence.”
“They rocked our financial markets with a multibillion dollar fraud,” he said in a statement. “And they corrupted our politics with tens of millions of dollars in illegal straw campaign contributions. These crimes demand swift and certain justice and that is exactly what we are seeking.”
Singh walked out of court on Tuesday after signing a US$250,000 bond — one-thousandth the size of the bond set for Bankman-Fried, who is out on a US$250 million bail package. Assistant U.S. Attorney Danielle Sassoon told the judge the government had agreed to the relatively low bond for Singh because he had voluntarily traveled back to the US from the Bahamas to meet with investigators after the collapse of FTX in November.
Singh joined Alameda in 2017 and helped write the software that FTX was built on. He also had a close personal relationship with Bankman-Fried, living with him in a Bahamas penthouse.
With assistance from Hadriana Lowenkron and Allyson Versprille.