Alleged Fraud By FTX Co-Founder: SEC Charged Nishad Singh

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Nishad Singh, Former Co-Lead Engineer of FTX, has been charged by the Securities and Exchange Commission (SEC) for his involvement in a fraudulent scheme to deceive equity investors in the exchange.

Singh co-founded FTX with Samuel Bankman-Fried and Gary Wang, and the alleged fraud reportedly spanned multiple years. The SEC’s charges mark a significant development in the ongoing investigation into the exchange and SBF’s operations.

The SEC has alleged that Singh developed software code enabling the transfer of FTX customer funds to Alameda Research. This was done despite false claims by SBF to investors that FTX was a secure trading platform for crypto assets, complete with advanced risk mitigation measures to safeguard customer funds.

Additionally, Singh is accused in the complaint of being aware of the false and misleading statements and participating in the plan to deceive the exchange’s investors.

The complaint further alleges that with Singh’s knowledge, SBF directed millions more of FTX customer funds to Alameda for venture investments and loans to FTX executives despite knowing that they could not reimburse the funds that were already diverted unlawfully.

Singh allegedly withdrew around $6 million from FTX as it approached collapse, including funds for personal expenses, a multi-million dollar house purchase, and charitable donations.

According to the complaint, this was fraudulent behavior as FTX claimed effective risk mitigation measures while Singh and his co-defendants stole customer funds using Singh’s software code.

The SEC’s Director of Enforcement, Gurbir S. Grewal, stated that companies and their representatives could not deceive investors on core investment decision matters, including crypto-asset securities.

Nishad Singh Agrees To Settlement In SEC’s FTX Investigation

According to the press release, Singh has been accused of breaching “the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.”

However, the SEC seeks a restraining order against Singh’s future violations of securities law, a conduct-based ban that forbids him from engaging in the issuance, purchase, offer, or sale of securities, except for his own personal accounts. Additionally, repayment of his illicit profits, a monetary penalty, and an officer and director prohibition.

Singh has agreed to a two-stage settlement that includes a permanent ban on breaking federal securities laws, the above-mentioned conduct-based ban, and an officer and director bar, subject to court approval.

The SEC will ask the court to determine the appropriate amount of disgorgement, civil penalty, and sanctions against Singh, while the U.S. Attorney’s Office and CFTC have also filed charges. Well, Singh is cooperating with the SEC’s investigation.

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In recent news, the Securities and Exchange Commission (SEC) has charged Nishad Singh, co-founder of the cryptocurrency exchange FTX, with carrying out alleged fraud. According to the SEC, Mr. Singh misled investors about the amount of cryptocurrency invested in the project and overstated its success.

The complaint, filed in the Southern District of New York, alleges that Mr. Singh misled investors by claiming that the project had investors with more than $2 billion in cryptocurrency. However, when contacted by the SEC, Mr. Singh admitted that the actual investment was “significantly lower” than the amount he claimed. In addition, the complaint alleges that Mr. Singh misrepresented the success of the project, including falsely claiming that the project was responsible for a 10x increase in trading volume on the FTX Exchange.

This is not the first time that the SEC has charged Mr. Singh with fraud. In August 2019, the SEC charged him with similar charges relating to a fraudulent virtual currency scheme.

The SEC seeks to bar Mr. Singh from participating in any offering of digital assets, impose a civil penalty, and issue an order enjoining Mr. Singh from further violations of the federal securities laws.

The SEC’s action underscores its continued commitment to root out and prosecute those who violate the securities laws. The SEC’s stance on virtual assets, as well as its continuing enforcement efforts, demonstrate that the Commission is serious about protecting investors from fraud, particularly in the crypto space. The SEC’s continued focus on curtailing fraud within the crypto industry should give investors some assurance that their investments are safe and that violators will be held accountable.