Securities and Exchange Commission (SEC) The United States has charged one of the former leading engineers of the FTX Trading Ltd cryptocurrency exchange.
Nishad Singh for his involvement in a multi-year scheme to defraud investors.
The investigation of other violations of securities laws by other organizations and individuals in the FTX case continues, the SEC said in a statement.
Singh was involved in the creation of FTX together with Sam Bankman-Freed and Gary Wang.
According to the commission’s statement, Singh wrote a program code that allowed FTX clients’ funds to be redirected to Alameda Research, despite Bankman-Fried’s false assurances that FTX is a secure platform for trading crypto assets with complex risk mitigation measures to protect clients’ assets and that Alameda is just another client without special privileges. Singh knew or should have known that such statements were false and misleading, the SEC believes.
According to the commission, Singh withdrew about $6 million from FTX for personal use, including the purchase of expensive real estate.
“We claim that this was fraud in its purest form: while, on the one hand, FTX advertised its effective risk mitigation measures to investors, on the other hand, Singh and other defendants stole customer funds using the program code that Singh helped create,” said Gurbir Grewal, director of the SEC department. “The basis of our securities laws is that when companies and their representatives decide to speak out, they cannot lie to investors on issues that are key to making investment decisions.”
At the end of 2022, the US authorities charged one of the most famous figures of the crypto industry, Bankman-Fried. In particular, he is accused of defrauding investors. According to the SEC, since May 2019, FTX has raised more than $1.8 billion from them (including $1.1 billion in the US) in exchange for joining the exchange’s capital.
In addition, FTX issued its own FTT tokens. At their peak in 2021, their combined value was $9.6 billion. Their buyers received certain financial preferences when making transactions on FTX, and within the Bankman-Fried group of companies, as it turns out now, they could be used as collateral for lending. The exchange, which attracted customer funds, issued loans under this scheme to another Bankman-Fried company – Alameda.
The implementation of fraudulent schemes began in 2019, from the moment FTX was founded, and continued until its collapse in November 2022, the SEC said.
These actions formed the basis of the charges brought against Bankman-Fried by the US Department of Justice. Among other things, he is charged with conspiracy to defraud, misappropriation of funds of FTX exchange clients, including for personal use. At the same time, Bankman-Fried insists that he does not know the details of what Alameda was doing, since it had its own CEO, Caroline Ellison.