Proactive Investors - Former FTX engineer Nishad Singh has become the third top executive of Sam Bankman-Fried’s collapsed cryptocurrency exchange to plead guilty to fraud charges, following similar admissions from Caroline Ellison and Gary Wang in recent months.
Singh was accused of developing the “back door” protocol that allowed Bankman-Fried’s Alameda Research hedge fund to access billions of dollars in user funds held on FTX.
The protocol allowed Alameda to borrow from FTX regardless of how much collateral secured its loans, providing what the US Securities and Exchange Commission (SEC) called a “virtually unlimited line of credit”.
This line of credit was used to make risky bets and trades which ultimately lost massive sums of stolen funds.
The SEC alleges that Singh directed millions of dollars of FTX customer funds to Alameda for investments and loans to Bankman-Fried, Singh, and other FTX executives.
Singh purportedly withdrew US$6mln from FTX for personal use, including buying a multimillion-dollar house and making donations to US politicians, just as FTX was nearing collapse.
When FTX filed for Chapter 11 bankruptcy protection in November 2022, users were unable to withdraw their funds, and there is no guarantee that they ever will.
Singh was a childhood friend of Bankman-Fried, though it is likely that he will provide evidence against him as part of a plea bargain.
Singh said he is “unbelievably sorry for my role in all of this”.
Bankman-Fried is living at his parents’ California residence on a US$250mln bail as he awaits trial.