SEC accuses former FTX top executive of deceiving investors

FTX’s former chief technology officer Nishad Singh was “an active participant” in a plan to defraud the platform’s customers. The matter is described in a statement settling the SEC’s claims.

Singh developed the platform’s code that allowed Alameda Research, a related entity, to access users’ funds.

Former CEO Sam Bankman-Fried (SBF) asserted that the exchange was safe thanks to sophisticated risk-management mechanisms, and Alameda was merely one of its clients. The former chief technology officer knew or should have known that these statements were misleading, the document says.

“This was fraud, pure and simple,” said Gurbir Grewal, Director of Enforcement at the SEC.

The SEC also accused Singh of orchestrating a “string of fictitious transfers within a group of firms and creating fake documentation for auditors.” He took this step to satisfy SBF’s request to show $1 billion in revenue for 2021, of which $50 million was missing.

Singh participated in moving hundreds of millions of dollars of customer funds to Alameda accounts for additional venture investments and loans.

The former senior executive continued to work despite opposition to some “ambitious projects” of the platform that lacked resources after aggressive acquisitions of startups and large spending on marketing, the SEC noted.

Singh was among those who knew about Alameda Research using exchange client funds and did not quit, unlike most of the market-maker’s staff after the disclosure by former CEO Caroline Ellison.

As FTX neared collapse, the former top executive withdrew $6 million from the platform for personal purposes — a multi-million-dollar home and donations.

At the Commission’s request, the court will determine whether disgorgement of ill-gotten gains is appropriate, and to what extent, along with interest on the ill-gotten gains and/or penalties.

In a parallel civil case, CFTC also said on Singh’s involvement in “fraud by misappropriation.” The former top executive did not contest the agency’s claims and “agreed with the proposed order on liability.”

Bloomberg reported that the former FTX chief technology officer was discussing admitting guilt in the fraud.

As reported, in December 2022, two other associates of SBF—former Alameda Research CEO Caroline Ellison and the exchange’s co-founder Gary Wang—pleaded guilty to the charges. Bankman-Fried did not strike a deal with prosecutors. In February 2023, the number of counts against the former CEO rose to 12.