FTX Co-Founder Nishad Singh Pleads Guilty in Fraud Inquiry

On Tuesday, Sam Bankman-Fried's former colleague and high-ranking executive pleaded guilty to criminal charges arising out of the collapse of cryptocurrency exchange FTX. He also agreed to cooperate federal prosecutors.

Nishad Singh (27), a founder of FTX, pleaded guilty in the settling of charges of wire fraud and commodities fraud, money laundering, and campaign finance violations. He must cooperate with federal prosecutors in the pursuit of Mr. Bankman Fried's billion-dollar fraud case.

Damian Williams, U.S. Attorney for the Southern District of New York stated in a statement that "Today's guilty plea underlines once more that the crimes committed at FTX were extensive in scope and consequence." They ruined our financial markets by committing a multibillion dollar fraud. They also corrupted our politics by illegal straw campaign contributions of tens to millions of dollars."

Andrew D. Goldstein, Russell Capone and Russell Capone, Mr. Singh’s lawyers, stated in a statement that "Nishad feels deeply sorry for his part in this and has taken responsibility for his actions." The statement also said that Mr. Singh wanted to help the government and "make it right for victims".

Although Mr. Singh is facing a maximum sentence of 75 years in prison, plea bargains often lead to significantly shorter sentences.

His cooperation increases the pressure on Mr. Bankman Fried, 30, who is charged with orchestrating a scheme that used billions of customer deposits to fund political contributions, fund over 300 ventures, and pay for other extravagant spending. After his arrest in the Bahamas where FTX was based, Mr. BankmanFried was extradited from the United States to be tried in federal court. Federal prosecutors said that Gary Wang and Caroline Ellison were part of his inner circle and had pleaded guilty for fraud.

Mr. Singh was a key figure in FTX and worked closely with Mr. Bankman Fried, Mr. Wang, and Ms. Ellison. The authorities claimed that Mr. Singh knew of and participated in an attempt "to artificially increase FTX's revenues" and that he had given misleading or false information to regulators and auditors.

The Securities and Exchange Commission and Commodity Futures Trading Commission filed civil complaints against Mr. Singh on Tuesday. According to the complaints, he knew that FTX, and Alameda Research, its sister hedge fund were using customer funds improperly and had contributed to creating software code that allowed fraud.

According to the S.E.C. Mr. Singh also assigned false dates to a series transactions in order to make it appear that FTX’s 2021 revenue was $50M higher than it actually was. He then lied to auditors about the scheme. The complaint stated that Singh took $6 million from FTX last September and October. He used the money to buy a house and charitable donations, even though he knew that FTX funds were being misused.

What you need to know about the collapse of FTX

What is FTX? FTX was a bankrupt company and one of the largest cryptocurrency exchanges in the world. Customers could trade digital currencies for traditional money or other digital currencies. FTT was also available. Based in the Bahamas, the company was founded on the risky trading options that were not legal in the United States.

Sam Bankman-Fried: Who are you? He is the founder of FTX at the age of 30 and was previously chief executive of FTX. He was once a crypto industry legend and was a major donor for the Democratic Party. He is also known for his dedication to effective altruism which encourages people to give their wealth in efficient and rational ways.

How did FTX's problems begin? Changpeng Zhao was the chief executive at Binance, the largest crypto exchange in the world. He sold his stake in FTX to Mr. Bankman Fried last year and received a number FTT tokens. In November, Zhao stated that he would be selling the tokens and expressed concern about FTX’s financial stability. Investors were scared by the move which drove down FTT's price.

What caused FTX's demise? The announcement by Mr. Zhao drove down the price and scared investors. FTX was left with an $8 billion shortfall as traders rushed to leave. Binance, FTX’s main competitor, offered a loan, but the company pulled out. FTX filed for bankruptcy on November 11.

FTX filed for bankruptcy after a crypto-bank run revealed an $8 billion hole within its accounts. It was the culmination of a yearlong crisis in the crypto industry that saw the market spiraling and resulted in billions in losses for investors.

In recent weeks, the investigation into FTX is gaining momentum. Federal prosecutors announced Thursday a new indictment against Mr. Bankman Fried. It included several new allegations and described the alleged scheme for defrauding customers and investors to funnel tens to millions of illegal campaign contributions to political candidates or political action committees.

According to a court filing, Mr. Bankman-Fried has pleaded not guilty to the original charges in January. He is expected to return in the coming months to face the revised charges. A spokesperson for Mr. Bankman Fried declined to comment.

Mr. Singh graduated from the University of California at Berkeley. After working as a software engineer for the Facebook applied machine-learning team, he joined Alameda, a crypto hedge fund Mr. Bankman Fried founded and still owns. Mr. Singh was also a close friend to Mr. Bankman Fried's younger brother Gabe. He ran Guarding Against Pandemics which received a lot of its financial support through FTX.

2019 saw the founding of FTX by Mr. Bankman Fried, Mr. Wang, and Mr. Singh in Hong Kong. The company was then moved to the Bahamas two-years later. Ms. Ellison and the three founders were active in the Effective Altruism Movement, which encourages donors to make use of data to maximize their long-term impact. They were all members of the FTX Foundation, Mr. Bankman Fried's philanthropic organization. Additionally, they lived in a luxury penthouse at Albany (a resort on New Providence, Bahamian Island).

As FTX grew in popularity, Mr. Bankman Fried became the public face of the company, while Mr. Wang, Mr. Singh and Mr. Wang were the key behind-the scenes contributors to the software code.

According to bankruptcy filings by FTX, Mr. Singh was granted a loan of $543 million from Alameda. The hedge fund also paid lawyers at Sullivan & Cromwell for legal advice regarding tax and estate planning.

As FTX grew, Mr. Singh was among a few of its executives. He was led by Mr. Bankman Fried and Ryan Salame who quickly became political megadonors.

Over the last several years, $93 million was contributed by FTX employees and other associates with the crypto exchange to political campaigns. Mr. Singh, Mr. BankmanFried and Mr. Salame primarily supported Democratic candidates. Mr. Salame funded Republicans.

Prosecutors claim that FTX organized a "straw donor" scheme in which a person makes a contribution to someone else to avoid any limits on individuals and companies. This was done to gain influence in Washington and to shape crypto regulations.

It appears that Mr. Singh was a key figure in this effort.

In the weeks leading up to the 2020 election, he donated nearly $9.7million, most of it to super-PACs affiliated with the Democratic Party. Campaign records show that he donated $1.1 million to the LGBTQ Victory Fund Federal PAC last summer. This account accounted for most of the money raised by this organization.

A revised indictment against Mr. Bankman Fried includes the allegation that a consultant to him pressured a co-conspirator to contribute at least $1,000,000 to a PAC "appeared" to be affiliated to pro-L.G.B.T.Q. issues."

The charges against Mr. Singh did not provide any details regarding the nature of his campaign finance violations. Prosecutors stated that Singh made contributions using funds from Alameda Research, and reported them to the Federal Election Commission under the names of people other than the true source.

Federal prosecutors began to seek information from Mr. Bankman Fried after his initial indictment. They also sought records about Mr. Singh's and Mr. Salame's donations to FTX, FTX, and Alameda. Several campaigns have donated or returned to charity amounts equal to the donations. Others have set aside funds to restitution victims of FTX’s collapse.

Reporting was contributed by Benjamin Weiser and Kenneth P. Vogel.