After ex-FTX Director of Engineering Nishad Singh was prosecuted with allegations of fraud by the Commodities Futures Trading Commission (CFTC), the case between FTX and Alameda Research in the U.S. gained traction.
Notable is that Singh pleaded guilty to the accusation of fraud that was brought before him on Tuesday.
Consequently, Sam Bankman-Fried, the former CEO of FTX, will have to defend himself against the statements made by three of his closest coworkers who have previously pled guilty.
Cases Against FTX from SEC
The CFTC and the SEC have filed charges against two cryptocurrency firms, accusing them of stealing over $8 billion worth of cash from their consumers.
It was reported that Signh’s attorney met with prosecutors in the United States last month to examine the possibility of entering into a cooperation agreement.
In addition to this, Signh was put in a difficult position because he owned a high-level security code for FTX. This code enabled Alameda to waste more than $8 billion by facilitating transactions.
“As a leader and supervising developer for FTX, Alameda or other institutions controlled by Samuel Bankman-Fried (“Bankman-Fried”), Singh did know of, preserved and/or had direct exposure to certain code features that facilitated Alameda to unlawful availability and use over $8 billion in FTX customer assets,” the CFTC stated (1).
Similarly, the SEC has also accused Singh of wire fraud, stating that he wrote software code that allowed FTX client funds to be sent to Alameda Research.
This allegation is based on the fact that the SEC believes Signh was aware of the cash transfer. In a news release, the SEC said that Signh diverted nearly $6 million from FTX for his personal use while the company was becoming closer to failing.
AS per (2) to the Director of the SEC’s Division of Enforcement, Gurbir S. Grewal,
“We assert this to be a fraud, pure and simple: on the one side, FTX hailed its presumed efficient risk-mitigation initiatives to investors.
On the other hand, Mr. Singh and his co-defendants have been embezzling client funds using computer code Mr. Singh assisted in creating,”
The FTX Case
Notwithstanding SBF’s assertion that the exchange had sufficient liquid assets to cover customers’ withdrawals, The FTX and Alameda Research filed for bankruptcy protection under Chapter 11 at the end of the previous year.
The interim CEO of FTX, John Ray III, stated that the exchange might be required to reopen to raise additional funds to repay the creditors.
Throughout the restructuring, FTX creditors can be required to issue additional shares that are redeemable after some time and represent the capital they have already contributed.
As top officials from FTX and Alameda pleaded guilty to charges brought against them, notably Caroline Ellison, Zixiao Gary Wang, and now Signh, the investigation being conducted by the United States government has made significant headway.
In the meantime, FTX Japan has recently resumed offering withdrawal services via its liquid Japan account.
Significantly, FTX Japan had around $146.5 million in assets right before the parent firm in the United States filed for protection under chapter 11 of the bankruptcy code.