Once declared the “safest place to be an FTX customer,” Japan might have one person to thank for that distinction, according to recently filed court documents.
That would be former FTX executive Nishad Singh, 29, who has pleaded guilty to one count of wire fraud, three counts of conspiracy to commit fraud, one count of conspiracy to commit money laundering, and one count of conspiracy to defraud the US by violating campaign finance laws.
Singh will be sentenced at the end of the month. In a memo asking US federal Judge Lewis Kaplan for leniency, the software engineer’s attorneys said he “lived a life of remarkably good works,” which include efforts to rein in FTX CEO Sam Bankman-Fried in the two months during which Singh learned of the fraud at the company to its spectacular collapse.
One of those efforts may have saved Japanese customers a lot of money.
“FTX Japan custodied its customer assets in a particular kind of ‘cold wallet’ that Bankman-Fried and [Gary] Wang could not access,” Singh’s attorneys wrote, referring to the FTX co-founder and chief technology officer.
“Bankman-Fried and Wang told the COO of FTX Japan to switch over to a different system that would give them access to those funds.”
Singh dissuaded FTX Japan’s chief operating officer from changing to a different system “precisely because he knew Bankman-Fried and Wang could improperly use the funds,” the lawyers wrote.
“In the final days of FTX, this meant that FTX Japan’s customer funds could not be used improperly to repay the debt owed to non-Japan FTX users.”
Three months after FTX declared bankruptcy, its Japanese subsidiary became the first to reopen customer withdrawals.
It was seen as a win for Japan’s tough crypto regulations, which require segregation of customer and exchange-owned assets, as well as storing customer cash with a third party, such as a Japanese bank or trust company.
In June, Japanese company bitFlyer said it would acquire FTX Japan and turn it into a crypto custody firm.
Sentencing the ‘king of kindness’
Last month, Kaplan sentenced Caroline Ellison, the star witness at the trial against Bankman-Fried, to two years in prison despite what he called her “very, very substantial cooperation” with prosecutors.
Ellison was the CEO at FTX sister company Alameda Research, a hedge fund whose massive losses Bankman-Fried attempted to plug using FTX customers’ money.
She was also his on-again, off-again girlfriend, and her emotional testimony was perhaps the most dramatic moment of last year’s five-week trial. Her attorneys asked Kaplan to sentence her to time served.
“I’ve seen a lot of cooperators in 30 years here. I’ve never seen one quite like Ms. Ellison,” the judge said, adding that he had failed to find “the slightest error of fact, the slightest inconsistency” in her testimony.
But she had participated in one of the worst frauds in financial history, and cooperation should not be a “get out of jail free card,” the judge said in handing down the 24-month sentence.
Singh’s attorneys also have asked Kaplan to sentence Singh to time served.
They cite his “extraordinary” circumstances, which include his relatively limited role in the collapse of FTX and his “immediate and exemplary” cooperation with prosecutors.
“He does not minimise his conduct; he pled guilty to serious crimes at the outset of this case and will regret his actions for the rest of his life,” his attorneys wrote.
“But his sentence should recognize that Nishad did not join the conspiracy at the heart of this case – the theft of FTX customer funds – until September 2022, just two months before the collapse of FTX, and after the core decisions were made by Sam Bankman-Fried and Caroline Ellison to use billions of dollars in customer funds to shore up Alameda’s finances and pay back its lenders.”
The filing was accompanied by more than 200 pages of letters from friends, family members and co-workers, who once dubbed him the “king of kindness.”
Since the collapse of FTX, Singh has found full-time work as a software engineer outside the finance and crypto industries and become engaged to longtime girlfriend Claire Watanabe, according to the letters.
‘Criminal error in judgement’
Raised in the Bay Area, Singh was childhood friends with Bankman-Fried’s younger brother. He graduated from the University of California, Berkeley, majoring in electrical engineering and computer science.
In late 2017, Singh joined Alameda, impressed by its employees’ commitment to effective altruism, a philosophy that encourages adherents to seek high-paying careers so they could donate their earnings to cost-effective charities.
Despite being an inexperienced programmer when he joined Alameda, he rose up the ranks. By the time FTX collapsed, Singh was the company’s head of engineering and its third largest shareholder.
In September 2022, Ellison and Wang told him Alameda had borrowed billions from FTX customers.
When Singh testified at Bankman-Fried’s trial, he said he stayed because he was afraid his departure could precipitate the company’s demise.
“It was a panicked, self-delusional, and ultimately criminal error in judgement,” his attorneys wrote.
“Nishad knew that staying at FTX meant hiding the existence of the hole from customers, and that he would be taking otherwise routine steps that, in these circumstances, would perpetuate the fraud.”
Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can reach him at aleks@dlnews.com.