The U.S. Commodity Futures Trading Commission (CFTC) filed the fraud charges against Nishad Singh, a senior FTX executive, in a complaint this week in U.S. District Court for the Southern District of New York.

The two counts charge Singh with fraud by misappropriation of public funds and aiding and abetting fraud committed by Samuel Bankman-Fried, FTX Trading Ltd.d/b/a FTX.com and Alameda Research LLC. Singh was a shareholder and senior executive of FTX, serving as its director of engineering when FTX folded in November 2022.

The charges against Singh relate to a previous lawsuit filed by the CFTC against Bankman-Fried, FTX, Alameda, FTX co-founder Gary Wang and Alameda co-CEO Caroline Ellison, which alleged that A fraudulent scheme resulted in the loss of more than $8 billion in FTX client assets.

The complaint alleges that from approximately May 2019 through November 11, 2022, FTX claimed that the client's assets were "in the custody" of FTX and segregated from FTX's own assets. Instead, FTX's client assets were typically held by FTX's sister digital asset trading firm, Alameda, and misappropriated by executives of Alameda, FTX, and Alameda for improper purposes, such as the purchase of luxury real estate, political contributions, and investments in the risky, illiquid digital asset industry.

As alleged, Singh was responsible for creating or maintaining various undisclosed components in the FTX base code that operated in conjunction with other functions to give Alameda functionality that enabled it to appropriate FTX customer assets. Among other things, these features in the FTX code benefit Alameda by enabling it to execute trades even when it does not have enough funds, and most critically, the "can withdraw below the loan limit" feature enables Alameda to withdraw billions of dollars in client assets from FTX.

The complaint further alleges that Singh personally misappropriated millions of dollars in assets, including those of FTX customers, by withdrawing funds from FTX for various personal expenses through "loans" from Alameda's poor records and other improper means. This was even done when Singh knew or should have known that the source of these assets was at least in part FTX client assets.

The CFTC warns that an order to repay funds to victims won't necessarily recover lost funds because the wrongdoers may not have enough money or assets.

In the ongoing litigation against Singh, and in the related ongoing litigation against Bankman-Fried, FTX, Alameda, and executives Ellison and Wang, the CFTC is seeking damages, discharges, civil penalties, and permanent trading and registration injunctions. And permanently prohibit further violations of the Commodity Exchange Act (CEA) and CFTC regulations.

In addition to the CFTC filing, Singh pleaded guilty Wednesday to commodity fraud and other charges in a separate, parallel lawsuit brought against him in the Southern District of New York. United States v. Nishad Singh, Crime No. 22-CR-673 (Southern District of New York, 2023). In that lawsuit, Singh agreed to forfeit certain assets obtained from FTX and Alameda. In addition, the US Securities and Exchange Commission (SEC) has also charged Singh in its own lawsuit.