To: Interested Parties
From: Dennis Kelleher, President and CEO
CC: Media Contact: Anton Becker, Dir. of Communications, abecker@bettermarkets.org
Date: October 28, 2024
Re: SBF/FTX Related Sentencing: October 30th Sentencing of Nishad Singh for his role in SBF’s FTX fraud
This Wednesday, October 30, 2024, Nishad Singh, FTX’s former chief engineer and a key participant in the FTX crypto scandal, will be sentenced for his part in one of the largest criminal frauds in financial history. Singh is charged in FTX’s spectacular collapse along with four other top FTX executives:
- Sam Bankman-Fried (“SBF”), who was sentenced to 25 years in prison;
- Caroline Ellison, who last month was sentenced to two years after extensively cooperating with authorities, but was not involved in the effort to subvert democracy through illegal political donations;
- Ryan Salame, who was sentenced to 7.5 years of prison after refusing to cooperate with authorities and made illegal political donations; and
- Gary Wang, who is scheduled to be sentenced in November.
Under applicable sentencing guidelines, Singh, a close associate of convicted crypto kingpin SBF, is facing many years in prison for his crimes. But Singh is unlikely to spend much time behind bars after the government filed a sentencing letter asking the Court to set aside those sentencing guidelines and highlighting Singh’s “exemplary cooperation that was important to the Government’s successful prosecutions of [SBF] and Ryan Salame, and the recovery of assets stolen during one of the largest financial frauds in history” which the government stated that Singh approached “with earnest remorse and eagerness to assist.” Singh, the government wrote, “also brought to the Government’s attention criminal conduct that the Government was not aware of and, in some cases, may have never discovered but for Singh’s cooperation.”
Indeed, Singh met with prosecutors “on at least 25 occasions often for many hours” and did testify against SBF at his trial; lambasting his former boss’s “flashiness” and describing SBF’s spending as “excessive” while describing how FTX and its affiliated hedge fund, Alameda Research, blew tens of millions of dollars of customer money on real estate and $1.13 billion on celebrity endorsements. Singh participated in securing celebrity endorsements in support of FTX and its crypto offerings that Singh testified made him “embarrassed” and “ashamed,” but SBF reassured him was necessary to maintain the illusion of being a safe investment. And, despite being an integral part of the FTX scheme, Singh’s attorneys released a statement at the time of his guilty plea stating that, “Nishad is deeply sorry for his role in this and has accepted responsibility for his actions. He wants to do everything he can to make things right for victims, including by assisting the government to the best of his ability . . .” And in Singh’s own sentencing memorandum filed by his attorneys, he is arguing for no prison time and only a period of supervised release due to his turning state’s evidence against SBF and the limited role he says he had in FTX’s wrongdoing.
Singh’s cooperation should not wipe out the enormity of his wrongdoing. Singh pled guilty to six conspiracy charges, including conspiracy to commit wire fraud, conspiracy to commit money laundering and conspiracy to violate federal campaign finances laws by funneling money through illegal straw donors, including Singh himself, that were far in excess of allowed limits, including hundreds of donations intended to manipulate crypto regulation and legislation. In an attempt to play both sides of the political aisle, SBF selected Singh to be the “center left face of our spending [which] will mean you giving to a lot of woke sh*t for transactional purposes.” As we have often noted, Better Markets was offered such a bribe by SBF and FTX, but turned it down.
It is critically important, as a general matter, for corporate insiders like Singh to come forward to help prosecutors unravel complex and often hidden financial crimes, and the earlier the better. In this case, while one can question the extent to which the violations remained hidden after FTX’s public collapse, the issues were clearly complex and difficult to unravel. It must be remembered, however, that Singh was not a whistleblower and did not come forward until FTX had imploded.
It must also be remembered that it is not an exaggeration to say that Singh was a major if not indispensable facilitator and contributor to the entire fraud. Singh faced a choice at multiple critical junctures during the criminal enterprise: do wrong or do right; break the law or not. Every time he chose to break the law. Yes, once the scheme blew up and the fraud burst onto into public view, he rushed to cooperate, but he could have single-handedly stopped this fraud at any time, long before billions of dollars were lost, hundreds of lenders and investors were defrauded, and tens of thousands of customers were ripped off. He chose not to, which resulted in, as the U.S. Attorney has said, “one of the largest financial frauds in history.”
These circumstances raise a difficult balancing task: fairly punishing the individual criminal who has cooperated in a particular case while at the same time sending a strong message of deterrence to those thinking of breaking the law in the future. Because it is so difficult to detect corporate, financial, and while collar crimes, which largely go undiscovered and unpunished, deterrence is of particular importance. That’s why the balance in these cases should tip toward harsher punishments and why monetary penalties that leave the white-collar criminals penniless and sentences that put the wrongdoer behind bars are essential.
There is another key issue at stake in corporate, financial, and while collar cases. When there are so many other non-white-collar criminals convicted of much less significant lawbreaking who are spending years if not decades in prisons across America, how can a justice system worthy of its name ever be viewed as fair if there is no prison time for white-collar criminals. Equal justice under law is at stake – as well as American’s faith, trust, and confidence in the justice system – in white collar cases and that should remain uppermost in mind when determining sentencing.
Thus, the key question at the heart of this sentencing is: Does a knowing and significant participant in a massive, years-long, historically large criminal financial fraud and the subversion of the democratic process deserve no jail time due to his cooperation and contrition, even accepting it as sincere? Considering all the issues and giving full weight to his cooperation, the answer must be no. Singh should be sentenced to at least three years in prison (at least one additional year than Ellison given his participation in making illegal campaign contributions) followed by three years of supervised release; required to disgorge every penny attributable to his activities related to FTX; and ordered to pay a civil fine of $1 million.
The Parties’ Positions.
Singh’s attorneys have filed an extensive sentencing memorandum detailing his life story and portraying him as a “uncommonly selfless individual” who has lived a life of “remarkably good works.” They also argue that his role was “far more limited than any other defendant” because he “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.” (Emphasis in original). Of course, this ignores the fact that Singh likely would have continued to accept the financial benefits of the joining conspiracy for years to come had FTX not collapsed. Singh’s attorneys portrayed his role in the effort to criminally corrupt the U.S. campaign process and undermine democracy as “almost entirely passive” even while acknowledging that he “allowed himself to be used as a straw at other people’s direction and for other people’s benefit.”
Singh’s sentencing memorandum also details his extensive cooperation with prosecutors, stating that he “left the Bahamas before FTX declared bankruptcy and immediately began taking screenshots of Signal messages that became critical to the government’s prosecution” and “flew to New York for the first of more than 20 proffer sessions” within two weeks of FTX declaring bankruptcy.
In pleading for a sentence that does not include a prison term, Singh’s attorneys argued that his role in the fraud was far less than Ellison’s and that the Court need not impose a prison sentence on him to show the world that cooperation is not a “get out of jail free card.”[1] Instead, they argued, the Court should not send him to jail so that others would be encouraged to cooperate with the authorities. Such a non-sentence would certainly draw a sharp cooperation contrast with that of fellow FTX executive, Ryan Salame, who pled guilty to conspiracy to make unlawful political contributions, defrauding the Federal Election Commission, and conspiracy to operate an unlicensed money transmitting business, but refused to cooperate with prosecutors. Salame, who did not receive cooperation credits, was sentenced to 7.5 years in prison, even though he arguably had a smaller role in the FTX conspiracy than, for example, Caroline Ellison. Singh also sought to distinguish himself from Gary Wang, writing that, “even by the end of his time at FTX, when he was Head of Engineering, Nishad worked under Gary Wang’s supervision and did not have nearly the same level of authority or autonomy as Wang.”
In its sentencing letter, the government wrote that, “[t]he evidence at [SBF’s] trial proved that over the course of multiple years, [SBF] stole and directed the misappropriation of billions of dollars in customers’ funds. The fraud is one of the largest financial frauds ever, resulting in billions of dollars in losses and thousands of affected victims. While not the mastermind, Singh, like [SBF’s] other co-conspirators, contributed to the fraud on FTX customers. As Singh described during his guilty plea and at [SBF’s] trial, he came to understand how customer funds had been used by [SBF] long after Singh assisted in putting in place the computer code that allowed [SBF] to steal the money.” This included implementing features in FTX’s code that allowed Alameda Research to have a negative balance on FTX; a feature that Singh understood would allow SBF to “withdraw billions of dollars in customer money from the FTX exchange.”
Indeed, the government pointed out that by mid-2022 Singh:
“Understood that Alameda was borrowing funds from FTX that belonged to other customers, that customers were not aware of this, and had not consented to such borrowing.” (Internal quotations omitted).
And, “[i]n his final months at FTX, despite knowing of the massive ‘hole’ at FTX, Singh spent and/or approved spending millions in what were customers’ funds” including completing “the purchase of a home in the San Juan Island for approximately $3.7 million, despite knowing that the money being withdrawn from FTX was necessarily customers’ money.” Additionally, over the course of 2022, Singh was enlisted to make large, coordinated donations in an effort to influence the midterm elections for the betterment of FTX and SBF. As the government outlined in its sentencing letter:
“As conceived of by [SBF], Salame made donations to Republican candidates, Singh made donations to largely progressive Democratic candidates, and [SBF] hewed closer to the center left. The donations were part of a collective effort to advance [SBF’s] political objectives and FTX’s business purposes.”
These are not minor or insignificant crimes. They go to the core of the corruption that was FTX’s business model and included undermining democracy.
Singh’s Central Role, the Harm Done, and the Wealth He Accumulated.
There is every reason to credit these claims that Singh’s cooperation was extensive and critically helpful and that he is genuinely remorseful. There is no question he deserves leniency. The question is how much, and to evaluate that one must remember what happened in this extraordinary scandal, Singh’s role in it, and the damage it caused.
Singh’s Role.
Singh pled guilty to six conspiracy charges, including conspiracy to commit wire fraud, conspiracy to commit money laundering and conspiracy to violate federal campaign finances laws by funneling money through illegal straw donors, including Singh himself, that were far in excess of allowed limits, including hundreds of donations intended to manipulate crypto regulation and legislation.
Importantly, at his plea hearing, Singh acknowledged that, “I also understood that any reporting of the donations would conceal that the money came from Alameda. And I knew at that time that Alameda money had to be coming, effectively, from FTX customer funds.”
The Harm.
The harm to investors was immense, notwithstanding the claim that FTX investors will eventually recover much if not all of their losses (at least as of the time FTX declared bankruptcy). Some investors certainly liquidated considerable losses as the revelations about FTX’s precarious financial condition began to emerge and the collapse of FTX approached. Moreover, as we detailed in our previous memo regarding the sentencing of SBF, claims regarding potential investor recovery paint an incomplete picture:
As the Government in its sentencing memo correctly points out, however, SBF’s victims’ potentially recovering their money years later is no reason to reduce SBF’s sentence for his crimes:
“That some victims may receive some money back through FTX’s bankruptcy is of little comfort for those victims who needed the money in November 2022. The suffocating sense of dread and despair that victims felt when they could not withdraw their money, their shame and embarrassment, and the resulting damage to lives and businesses, cannot be undone through the bankruptcy . . . [a]nd even as victims are repaid, that is the result of extensive work in the bankruptcy process and criminal forfeiture, not the result of the defendant’s actions, which in many respects have been counterproductive.”
And just because the harm to America’s political system and the public’s faith in the validity of elections as a result of FTX’s and Singh’s fraudulent political donations is difficult to quantify, does not mean that it is not significant.
Benefits to Singh.
Finally, there are the benefits to Singh. While perhaps not as great as those that accrued to Ellison, Singh benefited massively from FTX’s fraud. Although Singh’s attorneys in his sentencing memorandum acknowledge that Singh “became, on paper, worth tens and eventually hundreds of millions of dollars before FTX collapsed” they go on to make the incredible argument that, “he was not focused on personal fortune” and emphasized his charitable works. They also argue that Singh “always shied away from the spotlight. He had no interest in mingling with famous personalities who often visited the company . . .”
The Core Question.
Having served as a principal and knowing player in one of the most egregious financial frauds in history, does Singh deserve to avoid prison time altogether? He cooperated, yes. He is genuinely remorseful, yes. And he suffered public condemnation and harassment, yes. But does that mean that any fraudster can victimize countless investors and then walk free as long as they come forward when the scheme collapses and becomes public, feel genuine remorse, and cooperate with officials? How could that approach possibly serve as an effective deterrent against wrongdoing? And what do you say to the thousands of investors and others who were victims of the scandal? That his cooperation and contrition somehow make up for all the damage they suffered as a result of a fraud that he was instrumental in facilitating?
Remember, the government pointed out that by mid-2022 Singh:
“Understood that Alameda was borrowing funds from FTX that belonged to other customers, that customers were not aware of this, and had not consented to such borrowing.” (Internal quotations omitted).
Singh could have – and should have – come forward 30-60-90 or more days before FTX’s collapse. He could have been a whistleblower. He could have acted in a way that provided him with a strong basis for arguing no jail time, but he chose not to do that. He chose, once the end was near and the collapse was all but inevitable, to race to the prosecutor’s office to cooperate to get a better deal.
For that he should get a better deal, but no jail time would violate the most basic notions of justice. As we have argued consistently, those who lead, direct, participate in, and help carry out serious, intentional, and damaging financial crimes must be held accountable and properly punished. Moreover, their sentences must send a clear message that will deter others from committing future violations of the law. That’s true for those who work at the largest banks on Wall Street as well as for those who, like Singh, participate in a large-scale fraud through a new and novel financial produce such as crypto.
The judge on Wednesday has a tough job balancing competing interests here, but, as we said above, the sentence should be at least three years in prison (given his participation in the financial fraud and his making of straw campaign contributions); three years of supervised release; disgorgement of every penny attributable to his activities related to FTX; and a fine of $1 million. That would be a punishment that reflects the gravity of the crime, gives due consideration for the cooperation, and sends a strong deterrent message.
[1] As Judge Kaplan said at Ellison’s sentencing hearing, “For it to be a case this serious, to be a literal get-out-of-jail-free card – I cannot see a way to it.” See also Better Markets, Caroline Ellison’s Cooperation in Prosecuting the FTY Fraud is Important But Not a Get Out Of Jail Free Card (Sept. 20, 2024), https://bettermarkets.org/newsroom/caroline-ellisons-cooperation-in-prosecuting-the-ftx-fraud-is-important-but-not-a-get-out-of-jail-free-card/
