Release Number 8669-23
CFTC Charges FTX Co-Owner with Fraud by Misappropriation and Aiding and Abetting Fraud Related to Digital Asset Commodities
Nishad Singh to Concede Liability in Proposed Consent Order
February 28, 2023
Washington, D.C. — The Commodity Futures Trading Commission today filed fraud charges against Nishad Singh, an FTX senior executive, in a complaint filed in the U.S. District Court for the Southern District of New York. The two-count complaint charges Singh with fraud by misappropriation and with aiding and abetting fraud committed by Samuel Bankman-Fried, FTX Trading Ltd. d/b/a FTX.com (FTX), and Alameda Research LLC (Alameda). Singh was a shareholder and senior executive of FTX, and was FTX’s Director of Engineering at the time of its collapse in November 2022.
The charges against Singh are related to those in a previously filed and ongoing CFTC action against Bankman-Fried, FTX, Alameda, FTX Co-Founder Gary Wang, and Alameda Co-CEO Caroline Ellison, that alleges a fraudulent scheme causing the loss of over $8 billion in FTX customer assets. [See CFTC Press Release Nos. 8638-22 and 8644-22].
Singh does not contest his liability on the CFTC’s claims, and has agreed to the entry of a proposed consent order of judgment as to his liability on the charges in the complaint.
In its continuing litigation against Singh and in the related ongoing action against Bankman-Fried, FTX, Alameda, and executives Ellison and Wang, the CFTC seeks restitution, disgorgement, civil monetary penalties, permanent trading and registration bans, and permanent injunctions against further violations of the Commodity Exchange Act (CEA) and CFTC regulations, as charged.
“Today’s filing reflects the CFTC’s commitment to protecting the U.S. digital commodity markets. Today’s filing also includes a concession of liability by an individual who, as charged, engaged in and aided significant violations of the Commodity Exchange Act and CFTC regulations,” said Division of Enforcement Principal Deputy Director and Chief Counsel Gretchen Lowe.
The complaint alleges that from approximately May 2019 through November 11, 2022, FTX represented that customers’ assets were held in “custody” by FTX and segregated from FTX’s own assets. To the contrary, FTX customer assets were routinely held by FTX’s sister digital asset trading company, Alameda, and were misappropriated by Alameda, FTX, and Alameda executives for improper purposes such as luxury real estate purchases, political contributions, and high-risk, illiquid digital asset industry investments.
As alleged, Singh was responsible for creating or maintaining various undisclosed components in the code underlying FTX that, operating together with other features, granted Alameda functionalities that allowed it to misappropriate FTX customer assets. Among other things, these features in the FTX code favored Alameda and allowed it to execute transactions even when it did not have sufficient funds available, including, critically, a “can withdraw below borrow” functionality that allowed Alameda to withdraw billions of dollars in customer assets from FTX.
The complaint further charges that Singh personally misappropriated millions of dollars of assets, including FTX customer assets, through poorly documented “loans” from Alameda and other improper withdrawals of funds from FTX for various personal expenditures, and did so even after Singh knew or should have known the source of those assets was, at least in part, FTX customer assets.
The CFTC cautions that orders requiring repayment of funds to victims may not always result in the recovery of lost money because the wrongdoers may not have sufficient funds or assets.
Parallel Criminal/Civil Enforcement Actions
In addition to the CFTC’s filing, today Singh entered a guilty plea as to commodities fraud and other charges in a separate, parallel action against him in the Southern District of New York. United States v. Nishad Singh, Crim No. 22-CR-673 (S.D.N.Y. 2023). In connection with that action, Singh agreed to forfeit certain assets received from FTX and Alameda. In addition, today the Securities and Exchange Commission (SEC) charged Singh in its own action.
The CFTC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of New York, the Federal Bureau of Investigation, the SEC, and the Securities Commission of The Bahamas.
The Division of Enforcement staff responsible for this matter are Nina Ruvinsky, Bryan Hsueh, Carlin Metzger, Yusuf Capar, Ray Lavko, Ansley Schrimpf, Joseph Patrick, Jack Murphy, and Benjamin Jackman. The case is being supervised by Elizabeth N. Pendleton, Scott R. Williamson, and Robert T. Howell. The Division of Market Oversight and the Division of Clearing and Risk also assisted in this matter. The Division of Enforcement’s Digital Asset Task Force also provided assistance.
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Customers and other individuals can report suspicious activities or information, such as possible violations of commodity trading laws, to the Division of Enforcement via a toll-free hotline 866-FON-CFTC (866-366-2382), file a tip or complaint online, or contact the CFTC Whistleblower Office. Whistleblowers are eligible to receive between 10 and 30 percent of the monetary sanctions collected paid from the CFTC Customer Protection Fund financed through monetary sanctions paid to the CFTC by violators of the CEA.