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The SEC has also charged Signh with wire fraud, alleging that he created software code that allowed FTX customer funds to be diverted to Alameda Research.
The FTX and Alameda Research case in the United States gained momentum after former FTX director of engineering Nishad Singh was charged by the Commodity Futures Trading Commission (CFTC) with fraud allegations. Notably, Singh pleaded guilty to the fraud charges filed against him earlier on Tuesday. As a result, former FTX CEO Sam Bankman-Fried (SBF) will be fighting against statements by three closest colleagues who have already pleaded guilty.
CFTC and SEC vs FTX
The CFTC and the SEC have charged the two crypto entities with misappropriating over $8 billion of customers’ funds. Reportedly, Signh’s lawyer met with the United States prosecutors last month to discuss a potential cooperation agreement. Moreover, Signh had been cornered with the fact that he had access to a high-level security code to FTX that facilitated the transaction of over $8 billion squandered by Alameda.
“As a lead and supervising engineer for FTX, Alameda and other entities operated by Samuel Bankman-Fried (“Bankman-Fried”), Singh knew of, maintained and/or had access to certain code features that enabled Alameda to impermissibly access and use over $8 billion in FTX customer assets,” the CFTC noted.
Similarly, the SEC has also charged Signh with wire fraud, alleging that he created software code that allowed FTX customer funds to be diverted to Alameda Research. The SEC noted in a press release that Signh withdrew approximately $6 million for personal use from FTX as it neared to collapse.
“We allege that this was a fraud, pure and simple: while on the one hand, FTX touted its supposed effective risk mitigation measures to investors, on the other Mr. Singh and his co-defendants were stealing customer funds using software code Mr. Singh helped create,” said Gurbir S. Grewal, Director of the SEC’s Division of Enforcement.
The US Attorney’s Office has joined the SEC and the CFTC for the Southern District of New York in charging Signh with fraud cases.
The FTX and Alameda Research filed for chapter 11 bankruptcy protection late last year despite SBF claiming the exchange was liquid enough to cover customers’ withdrawals. According to interim FTX CEO John Ray III, the exchange may have to re-open to raise more cash to repay the creditors. The restructuring process could see FTX creditors issue new shares representing their invested capital and redeemable over time.
The United States investigators have gained massive traction after top FTX and Alameda officials, including Caroline Ellison, Zixiao Gary Wang, and now Signh, pleaded guilty to charges filed against them.
Meanwhile, FTX Japan has recently reopened withdrawal services through its liquid Japan account. Notably, FTX Japan had approximately $146 million before the parent company filed for chapter 11 bankruptcy protection in the United States.