Third top FTX executive pleads guilty in crypto fraud investigation

NEW YORK - A former high-ranking colleague of Sam Bankman-Fried on Tuesday became the third person to plead guilty to criminal charges arising from the

collapse of the cryptocurrency exchange FTX

and agree to cooperate with United States prosecutors.

Nishad Singh, 27, an FTX founder who went on to serve as the company director of engineering, pleaded guilty to charges of wire fraud, commodities fraud, securities fraud, money laundering and campaign finance violations. The plea requires him to work with US federal prosecutors as they pursue the billion-dollar fraud case against Bankman-Fried.

“Today’s guilty plea underscores once again that the crimes at FTX were vast in scope and consequence,” Mr Damian Williams, the US attorney for the Southern District of New York, said in a statement. “They rocked our financial markets with a multi-billion-dollar fraud. And they corrupted our politics with tens of millions of dollars in illegal straw campaign contributions.”

The charges against Singh carry a maximum prison term of 75 years, though plea deals often result in significantly reduced sentences.

Singh’s cooperation heightens the pressure on Bankman-Fried, 30, who has been charged with orchestrating a scheme to use billions in customer deposits to finance political contributions, fund more than 300 ventures and cover other lavish spending.

Bankman-Fried was extradited to the US on Dec 21

after his arrest in the Bahamas, where FTX was based. That night, federal prosecutors announced that two executives in his inner circle, Gary Wang and Caroline Ellison, were cooperating with the investigation and had pleaded guilty to fraud.

Singh was a key figure at FTX who worked closely with Bankman-Fried, Wang and Ellison.

In the plea agreement, the authorities said Singh had knowledge of or participated in an effort “to artificially inflate FTX’s revenue”, and that he had provided false or misleading information to auditors and regulators.

On Tuesday, the US Securities and Exchange Commission and the US Commodity Futures Trading Commission also filed civil complaints against Singh.

The complaints said that he had been aware that FTX and its sister hedge fund, Alameda Research, were misusing customer funds and that he had helped create software code that enabled the fraud.

According to the SEC, Singh also assigned fraudulent dates to a series of transactions to make it appear that FTX’s 2021 revenue was US$50 million (S$67 million) higher than it was, and then lied about the scheme to auditors.

The complaint said that last September and October, he withdrew roughly US$6 million from FTX for his personal use, spending the money on charitable donations and a multi-million-dollar house, when he knew FTX customer funds were being misappropriated.

FTX filed for bankruptcy in November after the crypto equivalent of a bank run exposed an US$8 billion hole in its accounts. Its implosion was the worst moment in a year-long crypto industry meltdown that sent the market spiralling and cost investors billions of dollars in lost deposits.

The investigation into FTX has gained steam in recent weeks.

On Feb 23, federal prosecutors announced

a revised indictment against Bankman-Fried

that included several new charges and detailed the alleged scheme to defraud customers and investors and funnel tens of millions in illegal campaign contributions to political candidates and political action committees.

Bankman-Fried pleaded not guilty in January to the original indictment and is expected to return to court in the next few months to be arraigned on the revised charges, according to a court filing.

Singh is a graduate of the University of California, Berkeley. He worked as a software engineer on the applied machine-learning team at Facebook and then joined Alameda, the crypto hedge fund that Bankman-Fried founded and owned.

Singh has also been a close friend of Bankman-Fried’s younger brother, Gabe, who ran Guarding Against Pandemics, an organisation that received much of its financial support from FTX.

In 2019, Bankman-Fried, Wang and Singh founded FTX in Hong Kong, before moving the company to the Bahamas two years later.

The three founders and Ellison were active in the effective altruism movement, a brand of philanthropy that urges donors to use data to maximise the long-term impact of their donations. They all sat on the board of the FTX Foundation, Bankman-Fried’s philanthropic operation, and lived together in a luxurious penthouse at Albany, a resort in the Bahamas.

As FTX grew, Bankman-Fried became its public face, while Wang and Singh were crucial behind the scenes, responsible for writing the software code for FTX.

According to FTX’s bankruptcy filings, Singh received a US$543 million loan from Alameda, and the hedge fund paid lawyers at Sullivan & Cromwell to provide him with legal advice on tax matters and estate planning.

As FTX took off, Singh was one of a handful of its executives, led by Bankman-Fried and Mr Ryan Salame, who suddenly emerged as political mega-donors.

In all, FTX employees and others associated with the crypto exchange contributed US$93 million to political campaigns over the past several years.

Prosecutors have argued that FTX orchestrated a “straw donation” scheme – in which a person makes a contribution in someone else’s name to avoid limits on individuals or companies – to build influence in Washington and shape crypto regulations. Singh appears to have been a key figure in that effort. NYTIMES