Singh was identified by whistleblower Ryan Salame, co-CEO of FTX Digital Markets as one of three people who could have allowed the theft of the exchange customers' funds.
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A third member of FTX founder Sam Bankman-Fried's innermost circle is being investigated by federal prosecutors looking into the collapse of the second-largest crypto exchange in a torrent of fraud allegations.
Having obtained guilty pleas and cooperation from FTX co-founder Gary Wang and former Alameda Research CEO Caroline Ellison, authorities are now focused on the exchange's head of engineering Nishad Singh, Bloomberg reported on Jan. 9.
Singh was one of a circle of FTX and Alameda executives who lived and worked with Bankman-Fried in a luxury penthouse in The Bahamas. He and Wang are the two people who were fingered as having authority to transfer FTX customers' funds to Alameda by FTX Digital Markets co-CEO Ryan Salame, who warned Bahamian authorities of the fraud a few days before the exchange collapsed.
Federal prosecutors from the Southern District of New York have charged Bankman-Fried with eight counts of fraud, conspiracy and money laundering for allegedly taking some $10 billion belonging to one million FTX exchange customers and illegally using it to cover losses by his crypto trading firm Alameda. As much as $8 billion is missing and likely gone.
No charges have been filed against Singh, Bloomberg said — and it isn't clear if he is cooperating with prosecutors like Wang and Ellison.
Cracking Code
In December, Reuters reported that Singh was the one who made code changes that prevented Alameda's assets from being liquidated by FTX if the trades went bad. That allowed Alameda "a virtually unlimited 'line of credit' funded by the platform's customers," the Securities and Exchange Commission (SEC) said in a Dec. 13 announcement that it was charging Bankman-Fried with civil fraud.
A day later, Bloomberg reported that it had reviewed code in a GitHub account in Singh's name that allowed FTX to hide Alameda's ballooning losses.
The second chunk of code allowed Bankman-Fried's firms to shunt billions of dollars in debt "to an FTX customer account that wasn't easily identifiable as belonging to Alameda," Bloomberg said.
This was, it said, the "Korean" account referred to by the U.S. Commodity Futures Trading Commission (CFTC) in its own Dec. 13 fraud lawsuit. The agency said:
"At least in part to remediate the risk that Alameda's large liability would be discovered, at Bankman-Fried's direction, FTX executives reallocated Alameda's approximately $8 billion in liabilities to a customer account on FTX's systems that Bankman-Fried would later refer to as 'our Korean friend's account' and/or 'the weird Korean account.' This was technically a sub-account of Alameda, but unlike other Alameda sub-accounts on FTX, it was not … readily identifiable as being an Alameda-associated account. The system notes associated with the account described it as "FTX fiat old." As a result, it was no longer apparent on FTX's ledgers that Alameda had an $8 billion negative balance on its FTX account."
