SEC Charges Ex-Director of FTX: Is SBF in trouble again?

    Simar Marwaha
    Simar Marwaha
    Published on March 02, 2023 06:42 PM

    Nishad Singh, ex-director of FTX, pled guilty to wire fraud, conspiracy to conduct wire fraud on FTX clients, and commodities fraud. Now he is being sued by the SEC and the CTFC. Let's find out more.

    SEC Charges Ex-Director of FTX: Is SBF in trouble again?
    Source: Facebook

    Former FTX director of engineering Nishad Singh admitted guilt to fraud charges brought by US prosecutors and consented to assist them in their inquiries into former FTX CEO Sam Bankman-Fried (SBF).

    According to a Reuters report, Singh's attorney revealed during the hearing in a federal court in Manhattan that his client had decided to enter a guilty plea to one count of wire fraud, one count of conspiracy to commit wire fraud on FTX customers, and one count of conspiracy to commit commodities fraud.

    According to an inquiry, Singh, who is 2019 was appointed director of engineering at FTX, was a close friend of FTX founder Sam Bankman-younger Fried's brother in high school. 

    In 2020, it claimed that Singh changed the FTX software to enable Alameda, where he had previously served as chief executive, to escape having its assets sold off automatically when it lost too much-borrowed money. 

    According to Reuters, this loophole allowed Alameda to continue borrowing from FTX regardless of the collateral used to support its loans. According to the U.S. Securities and Exchange Commission, this code update allowed Alameda access to a "nearly unlimited line of credit" at FTX. The billions of dollars FTX granted Alameda over the following two years were funded by FTX clients.

    Unlike other FTX executives, Singh stayed out of the public eye for a more prolonged period. He returned at the beginning of January to participate in a proffer session at the United States Attorney's office for the Southern District of New York. The individual supplying information may have some protection during a proffer session so they may reveal their insights to the prosecution.

    Singh's plea comes after some of Bankman-Fried's close friends recently consented to assist investigators. Bankman-Fried, residing in California with his parents, has entered an innocent plea to eight federal counts. While FTX's bankruptcy case is still pending in the District of Delaware Office of the United States Bankruptcy Court, his criminal trial is set to start in federal court in October.

    SEC and CFTC Involvement

    Nishad Singh was charged with civil wrongdoing on February 28, the same day he pleaded guilty to three counts of criminal fraud in Manhattan district court. The Commodities Futures Trading Commission (CFTC) and the United States Securities and Exchange Commission (SEC) are investigating him.

    After allegedly striking an agreement with prosecutors, Singh pled guilty to one count of wire fraud, one count of conspiracy to commit wire fraud on FTX clients, and one count of conspiracy to commit commodities fraud in U.S. District Court for the Southern District of New York.

    Singh is accused of fraud by misappropriation and of helping Samuel Bankman-Fried, FTX, and Alameda Research conduct fraud, according to the CFTC. Singh is accused of breaking the anti-fraud provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 in the SEC's complaint.

    According to SEC:

    “Singh also knew or was reckless in not knowing that, more generally, Bankman-Fried often operated the companies [FTX and Alameda Research] without regard for responsible corporate controls and appropriate conduct.”

    According to that organization, Singh consented to enter a proposed settlement agreement and did not challenge the CFTC's allegations. The SEC claims that Singh has agreed to a split settlement that places a number of restrictions on him and is subject to court approval. According to the SEC, he will be prohibited from serving as an officer or director and will be permanently barred from breaching federal securities laws.

    His eligibility for "disgorgement of ill-gotten gains plus prejudgment interest and/or a civil penalty" will also be decided by the court.

    The SEC and CFTC have also filed charges against former FTX CEO Sam Bankman-Fried, former Alameda Research CEO Caroline Ellison, and former FTX Chief Technology Officer Gary Wang. Ellison and Wang agreed to stay in the CFTC lawsuits but settled their claims with the SEC. Cases brought by the SEC and CFTC against Bankman-Fried were suspended pending the outcome of his criminal trial.