A third domino has just fallen in the case against Sam Bankman-Friend, the founder of the FTX cryptocurrency exchange and its sister company, Alameda Research.
That's Nishad Singh, who had been director of engineering at FTX. A Bankman-Fried lieutenant, Singh pleaded guilty to six charges, including conspiracy to commit wire fraud, conspiracy to commit money laundering and conspiracy to violate federal campaign-finance laws.
Singh has also agreed to cooperate with federal prosecutors and the Securities and Exchange Commission in their investigation about what they call a "multiyear scheme to defraud equity investors in FTX."
He thus becomes the third person close to Bankman-Fried to plead guilty and cooperate with regulators. Caroline Ellison, former CEO of Alameda Research, and Gary Wang, co-founder of FTX, were the first to reach agreements with the authorities.
'Crimes at FTX Were Vast in Scope': U.S. Attorney
“Today’s guilty plea underscores once again that the crimes at FTX were vast in scope and consequence,” said Damian Williams, U.S. attorney for the Southern District of New York.
“They rocked our financial markets with a multibillion-dollar fraud. 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 in the Southern District of New York.”
FTX and Alameda Research filed for bankruptcy on Nov. 11, unable to meet customer withdrawal requests.
The SEC and the Commodity Futures Trading Commission also filed civil fraud charges against Singh. The former top executive of FTX reached an agreement with the two regulators, which includes giving up ill-gotten gains; a civil penalty; and an officer and director bar. The settlement has to be approved by a judge.
"Singh created software code that allowed FTX customer funds to be diverted to Alameda Research, a crypto hedge fund owned by Bankman-Fried and Wang, despite false assurances by Bankman-Fried to investors that FTX was a safe crypto asset trading platform," the SEC in its complaint.
"Singh created software code that allowed FTX customer funds to be diverted to Alameda Research, a crypto hedge fund owned by Bankman-Fried and Wang, despite false assurances by Bankman-Fried to investors that FTX was a safe crypto asset trading platform," the SEC said in its complaint.
"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,” said Gurbir S. Grewal, director of the SEC’s division of enforcement.
In a statement given by his lawyers, Singh apologized.
“Nishad is deeply sorry for his role in this and has accepted responsibility for his actions. 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,” attorneys Andrew Goldstein and Russell Capone said.
One Domino Is Left Standing
This latest development involving Singh is very bad news for Bankman-Fried, who thus sees all his close aides cooperate with investigators.
The trial of the former trader is scheduled for October. Charged with 12 counts including fraud and conspiracy to defraud clients and investors of FTX and Alameda, he is currently under house arrest after posting $250 million bail.
The former crypto king has pleaded not guilty.
Only Ryan Salame, former co-CEO of FTX Digital Markets and one of SBF's last lieutenants, has not yet been officially announced as cooperating with the authorities.
In court documents unsealed last week, federal prosecutors accused Singh and Salame of participating in an alleged illegal straw donor scheme set up by Bankman-Fried to buy influence in Washington.
The names of the two executives were not disclosed; the document identified them as "CC-1" or "coconspirator 1" and "CC-2" or "coconspirator 2." But data from the Federal Election Commission enabled identification of Singh as "CC-1," while documents from campaign finance watchdog OpenSecrets show that Salame was "CC-2."
Singh, now CC-1, became the face of Bankman-Fried's and FTX's more left-leaning spending. Salame, now CC-2, who identifies as a Republican, would, according to prosecutors, make contributions to conservatives for Bankman-Fried.
In total, between fall 2021 and the November 2022 midterm election, Bankman-Fried, Singh and Salame collectively made millions of dollars in contributions, including so-called hard money contributions to federal candidates from both major political parties, the indictment asserted.
They made, prosecutors claimed, more than 300 political contributions totaling tens of millions of dollars that were unlawful because they were made in the name of a straw donor or paid for with corporate funds, prosecutors added.
