A third member of FTX founder Sam Bankman-Fried’s inner circle pled guilty to fraud charges and agreed to cooperate with federal prosecutors, broadening the pool of cooperating witnesses against the bankrupt crypto exchange’s former CEO.
During a hearing in federal court in Manhattan on Tuesday, Nishad Singh, the company’s former director of engineering, pled guilty to six criminal offenses, including conspiracy to commit securities and commodities fraud.
“I’m unbelievably sorry for my role in all of this and the harm that it has caused,” Singh told U.S. District Judge Lewis Kaplan.
The 27-year old Singh stated that he discovered Bankman-Fried’s crypto hedge fund Alameda Research was borrowing FTX customer funds in mid-2022. He added that Alameda would be unable to return the billions of dollars it had borrowed from FTX by September 2022 and admitted that he faked FTX’s revenues at the request of Bankman-Fried in order to make the company more desirable to investors.
“I had a strong belief that he would not share FTX’s full financial condition,” Singh said.
He also admitted to defrauding the United States in a campaign fundraising scheme. He admitted in court that he used Alameda funds to make unlawful contributions to political action organizations and candidates, adding those were “to enhance Bankman-Fried and FTX’s political influence.”
Prosecutors filed a new indictment accusing Bankman-Fried with additional crimes last week. They allege that he and two other former FTX executives plotted to donate tens of millions of dollars in order to persuade lawmakers to support laws advantageous to the corporation.
The donations were deemed illegal since they were made with “straw” donors or corporate funds. They said Bankman-Fried authorized another FTX executive, designated as CC-1, to make a $21 million donation to a pro-LGBT organization.
According to Federal Election Commission records, Singh contributed $1.1 million to the LGBTQ Victory Fund, a national group focused to electing openly LGBTQ people, on July 7, 2022.
Singh said in court that in 2022, he consented to make political payments in his own name that were partially paid by transfers from Alameda, but he did not provide any details about the donations. He stated that, while he agreed with the political views of individuals to whom he donated, he did not choose the candidates.
Under the terms of his plea agreement, Singh is compelled to testify at any trial if federal prosecutors request it.
“Today’s guilty plea underscores once again that the crimes at FTX were vast in scope and consequence,” Damian Williams, the top federal prosecutor in Manhattan, said in a statement. “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.”
The former chief engineer was reported previously to be in discussions with federal prosecutors in an attempt to become the third member of Bankman-Fried’s inner circle to seek a cooperation arrangement in the cryptocurrency exchange’s fraud lawsuit.
This follows former Alameda CEO Caroline Ellison and former FTX CTO Zixiao (Gary) Wang also working with law enforcement agencies after pleading guilty to charges of fraud, pinning Bankman-Fried further into a corner. Soon after, former in-house lawyer Daniel Friedberg was later disclosed to also be helping US prosecutors in their investigation.
Contradictorily, Bankman-Fried pled not guilty to allegations of fraud, conspiracy, campaign finance law violations, and money laundering. The trial of FTX’s founder is set for October.
Bankman-Fried was arrested and extradited from the Bahamas in December on fraud and conspiracy charges linked to FTX’s demise.
The Securities and Exchange Commission and the Commodities Futures Trading Commission also both filed civil fraud complaints against Singh on Tuesday. According to the SEC, Singh wrote software code that permitted FTX client cash to be redirected to Alameda, and he was aware that Bankman-Fried was improperly using such funds for venture investments and other reasons.
Despite knowing of the shakiness of FTX and Alameda’s finances, Singh took around $6 million from FTX for personal use, including the purchase of a residence and charitable donations, according to the SEC’s claim.
According to the SEC, Singh consented to a settlement, subject to court approval, in which he would be restricted from serving as an officer or director of a public corporation and pay a penalty, the amount of which is unknown. Similarly, the CFTC stated that Singh did not oppose its accusations.
Information for this briefing was found via The Wall Street Journal, Reuters, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.