Press Release

The Securities and Exchange Commission charges Nishad Singh for his role in defrauding investors in FTX

Background

The Securities and Exchange Commission (SEC) has taken legal action against Nishad Singh, the former Co-Lead Engineer of FTX Trading Ltd. (FTX), for his involvement in a multiyear scheme to defraud equity investors in FTX. Singh, along with Samuel Bankman-Fried and Gary Wang, started FTX, a crypto trading platform. The SEC is currently conducting investigations into other securities law violations and individuals/entities associated with the alleged misconduct.

Fraudulent Scheme Allegations

According to the SEC’s complaint, Singh created software code that enabled the diversion of FTX customer funds to Alameda Research, a crypto hedge fund owned by Bankman-Fried and Wang. This occurred despite Bankman-Fried’s false assurances to investors that FTX was a secure crypto asset trading platform with sophisticated risk mitigation measures in place to protect customer assets. Bankman-Fried also claimed that Alameda had no special privileges and was just another customer. The SEC alleges that Singh knew or should have known that these statements were false and misleading.

Active Participation in Deception

The SEC’s complaint further alleges that Singh actively participated in the scheme to deceive FTX’s investors. Even as it became clear that Alameda and FTX were unable to reimburse customers for the unlawfully diverted funds, Bankman-Fried, with Singh’s knowledge, directed hundreds of millions of dollars more in FTX customer funds to Alameda. These additional funds were used for venture investments and loans to Bankman-Fried, Singh, and other FTX executives.

Personal Use of Funds

As FTX faced potential collapse, the complaint states that Singh withdrew approximately $6 million from the company for personal use. These funds were used for various expenditures, including the purchase of a multi-million dollar house and donations to charitable causes.

Fraud and Securities Law Violations

Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, described the actions as “fraud, pure and simple.” The SEC alleges that while FTX presented itself as a platform with effective risk mitigation measures, Singh and his co-defendants were stealing customer funds using software code he helped create. The SEC’s complaint charges Singh with violating anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934.

SEC’s Legal Actions and Remedies

The SEC’s complaint seeks several remedies against Singh, including:

  • An injunction to prevent future violations of securities laws
  • A conduct-based injunction that prohibits Singh from participating in the issuance, purchase, offer, or sale of any securities, except for his own personal accounts
  • Disgorgement of the ill-gotten gains
  • A civil penalty
  • An officer and director bar

Singh has consented to a bifurcated settlement, pending court approval. Under this settlement, he will be permanently barred from violating federal securities laws, subject to the conduct-based injunction and officer and director bar. The court will determine the appropriate amount of disgorgement, prejudgment interest, civil penalty, and the length of the officer and director bar and conduct-based injunction.

Parallel Charges and Cooperation

In a parallel action, the U.S. Attorney’s Office for the Southern District of New York and the Commodity Futures Trading Commission (CFTC) have also announced charges against Singh.

Singh is cooperating with the SEC’s ongoing investigation, which is being conducted by Devlin N. Su, Ivan Snyder, and David S. Brown of the Crypto Assets and Cyber Unit and Brian Huchro, Pasha Salimi, and Ainsley Kerr. The investigation is supervised by Amy Flaherty Hartman, Michael Brennan, Jorge Tenreiro, and David Hirsch. The SEC’s litigation will be led by Amy Burkart and David D’Addio, under the supervision of Ladan Stewart and Olivia Choe.

Appreciation for Assistance

The SEC acknowledges the assistance provided by the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation (FBI), and the Commodity Futures Trading Commission (CFTC) in this investigation.