A former high-ranking colleague of Sam Bankman-Fried on Tuesday became the third person to plead guilty to criminal charges stemming from the collapse of cryptocurrency exchange FTX and agree to cooperate with federal prosecutors.
Nishad Singh, 27, a founder of FTX who served as the company’s director of engineering, pleaded guilty to charges of wire fraud, commodity fraud, securities fraud, money laundering and campaign finance violations. The guilty plea requires him to work with federal prosecutors in the billion-dollar fraud case against Mr. Bankman-Fried.
“Today’s guilty plea once again underscores that the crimes at FTX were far-reaching and consequential,” Damian Williams, 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 false campaign contributions.”
Andrew D. Goldstein and Russell Capone, Singh’s lawyers, said in a statement that “Nishad deeply regrets his role in this and has accepted responsibility for his actions.” Mr Singh wants to help the government and “make things right for the victims,” the statement said.
The charges against Mr. Singh carry a maximum prison term of 75 years, although plea bargains often result in significantly reduced sentences.
Their cooperation increases the pressure on Bankman-Fried, 30, who has been accused of orchestrating a scheme to use billions in customer deposits to finance political contributions, finance more than 300 companies and cover other lavish expenses. Mr. Bankman-Fried was extradited to the United States on December 21 after his arrest in the Bahamas, where FTX was based. That night, federal prosecutors announced that two executives from his inner circle, Gary Wang and Caroline Ellison, were cooperating with the investigation and had pleaded guilty to fraud.
Mr Singh was a key figure at FTX working closely with Mr Bankman-Fried, Mr Wang and Ms Ellison. In the plea agreement, authorities said that Mr. Singh knew 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 Securities and Exchange Commission and the Commodity Futures Trading Commission also filed civil lawsuits against Mr. Singh. The complaints said that he knew that FTX and its sister hedge fund, Alameda Research, were misusing client funds and that he had helped create software code that enabled the fraud.
According to the SEC, Mr. Singh also assigned fraudulent dates to a series of transactions to make it appear that FTX’s 2021 revenue was $50 million higher than it was, and then lied about the scheme to auditors. And last September and October, according to the complaint, he withdrew approximately $6 million from FTX for his personal use, spending the money on charitable donations and a multimillion-dollar home, when he knew FTX client funds were being misappropriated.
What to know about the FTX crash
What is FTX? FTX is a now bankrupt company that was one of the largest cryptocurrency exchanges in the world. It allowed customers to exchange digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. The Bahamas-based company built its business on risky trading options that are not legal in the United States.
Who is Sam Bankman-Fried? He is the 30-year-old founder of FTX and a former CEO of FTX. Once a golden boy of the crypto industry, he was a major donor to the Democratic Party and known for his commitment to effective altruism, a charitable movement that encourages adherents to donate their wealth efficiently and logically. .
How did the FTX problems start? Last year, Changpeng Zhao, CEO of Binance, the world’s largest cryptocurrency exchange, sold his stake in FTX to Mr. Bankman-Fried, receiving a number of FTT tokens in return. In November, Mr. Zhao said that he would sell the tokens and raised concerns about FTX’s financial stability. The move, which lowered the price of FTT, spooked investors.
What led to the collapse of FTX? Zhao’s announcement sent the price down and spooked investors. Traders were quick to pull out of FTX, putting the company in an $8 billion deficit. Binance, FTX’s main rival, offered a loan to save the company, but then backed out, forcing FTX to file for bankruptcy on Nov. 11.
FTX filed for bankruptcy in November after the crypto equivalent of a bank run exposed an $8 billion hole in its accounts. Its implosion was the worst moment in a year-long crypto industry crash that sent the market soaring and cost investors billions of dollars in lost deposits.
Research on FTX has gained steam in recent weeks. On Thursday, federal prosecutors announced a revised indictment against Mr. Bankman-Fried that included several new charges and detailed the alleged scheme to defraud clients and investors and funnel tens of millions in illegal campaign contributions to political candidates and action committees. policy.
Mr. Bankman-Fried pleaded not guilty in January to the original indictment and is expected to return to court in the coming months for arraignment on the revised charges, according to a court filing. A Bankman-Fried spokesman declined to comment.
Mr. Singh graduated from the University of California, Berkeley. He worked as a software engineer on the applied machine learning team at Facebook and later joined Alameda, the cryptocurrency hedge fund that Bankman-Fried founded and owns. Mr Singh has also been a close friend of Mr Bankman-Fried’s younger brother, Gabe, who ran Guarding Against Pandemics, an organization that received much of its financial support from FTX.
In 2019, Mr. Bankman-Fried, Mr. Wang and Mr. Singh founded FTX in Hong Kong, before relocating the company to the Bahamas two years later. The three founders and Ms. Ellison were active in the effective altruism movement, a type of philanthropy that encourages donors to use data to maximize the long-term impact of their giving. They were all on the board of directors of the FTX Foundation, Bankman-Fried’s philanthropic operation, and lived together in a luxurious penthouse in Albany, a resort on the Bahamian island of New Providence.
As FTX grew, Mr. Bankman-Fried became its public face, while Mr. Wang and Mr. Singh were crucial behind the scenes, responsible for writing the software code for FTX.
According to FTX’s bankruptcy filings, Mr. Singh received a $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.
The consequences of the fall of FTX
The spectacular collapse of the cryptocurrency exchange in November has left the industry stunned.
- Jane Street Capital: FTX’s collapse has drawn attention to the little-known Wall Street firm where Sam Bankman-Fried began his career. He was drawn there by his interest in “effective altruism.”
- Game markets?: Since FTX imploded, Mr Bankman-Fried denied allegations that he manipulated the markets to benefit his companies. Cryptocurrency investors disagree.
- Bail Terms: A federal judge overseeing the Bankman-Fried case has signaled his willingness to jail the disgraced executive for his persistent testing of the limits of his confinement.
- Legal counsel: A judge has allowed law firm Sullivan & Cromwell to continue advising FTX on bankruptcy after critics complained of a potential conflict of interest between the firm and the exchange.
When FTX took off, Singh was one of the few executives, led by Bankman-Fried and Ryan Salame, who suddenly emerged as political megadonors.
In total, FTX employees and others associated with the cryptocurrency exchange have contributed $93 million to political campaigns over the past few years. Singh and Bankman-Fried mainly backed the Democratic candidates, while Salame bankrolled the Republicans.
Prosecutors have argued that FTX orchestrated a “straw donation” scheme, in which one person makes a contribution on behalf of another person to bypass limits on individuals or companies, to build influence in Washington, and to shape crypto regulations.
Mr. Singh appears to have been a key figure in that effort.
Starting in the weeks leading up to the 2020 election, he donated nearly $9.7 million, mostly to super PACs associated with the Democratic Party. Last summer, she donated $1.1 million to the LGBTQ Victory Fund Federal PAC, accounting for the majority of the money raised by the organization, campaign records show.
The revised indictment against Mr. Bankman-Fried includes an allegation that a political consultant working for him pressured an anonymous co-conspirator to make a contribution of at least $1 million to a PAC that “appeared to be affiliated with pro-issues.” -LGBTQ.”
The charging document against Mr. Singh provided few details about the nature of his campaign finance violations. But prosecutors wrote that Mr. Singh had made contributions “that were paid for with funds from Alameda Research and reported to the Federal Election Commission on behalf of persons who were not the true source of the funds.”
After Mr. Bankman-Fried’s initial indictment, federal prosecutors began seeking information about donations from him, Mr. Singh, Mr. Salame, FTX and Alameda, including requesting records about the attorneys’ contributions representing the beneficiaries. Several campaigns have returned or donated amounts matching the donations to charity, while others have set aside funds for possible restitution to victims of the FTX collapse.
Kenneth P Vogel and Benjamin Weiss contributed reporting.
