Nishad Singh, a prominent adviser to the disgraced cryptocurrency entrepreneur Sam Bankman-Fried, evaded prison time for his involvement in the downfall of the FTX crypto exchange. This decision came after a federal judge praised his cooperation with U.S. prosecutors during a hearing on Wednesday.

At the Federal District Court in Manhattan, Mr. Singh, 29, received a sentence of three years of supervised release, a surprising outcome given the lengthy sentences imposed on Mr. Bankman-Fried and two other FTX executives. Judge Lewis A. Kaplan, overseeing the cases, acknowledged Mr. Singh’s significant assistance to the government and noted that his role in the fraud was “much more limited” compared to that of his colleagues.

“I’m not naive enough to believe there was no self-interest involved,” Judge Kaplan remarked about Mr. Singh’s cooperation. “But you made the right choice.”

Shortly after FTX’s collapse in November 2022, Mr. Singh pleaded guilty to participating in the fraud that resulted in the loss of $8 billion from customer accounts. He also confessed to violating campaign finance laws by acting as a straw donor—making political contributions in his own name using funds from the company. Both Mr. Singh’s lawyers and prosecutors sought leniency, urging that he face no prison time.

Mr. Singh is among several executives from Mr. Bankman-Fried’s former enterprise charged with fraud. In March, Mr. Bankman-Fried, now 32, was sentenced to 25 years in prison following his conviction last year on seven counts of fraud and conspiracy.

The other executives sentenced had all pleaded guilty to various financial offenses. Caroline Ellison, another close associate of Mr. Bankman-Fried, received a two-year prison sentence last month. Ryan Salame, an FTX executive, was sentenced to seven and a half years in May for campaign finance violations, while Gary Wang, another leader in the company, is set to be sentenced on November 20.

Mr. Singh, a graduate of the University of California, Berkeley, joined Mr. Bankman-Fried’s crypto hedge fund Alameda Research in 2017 as a software engineer. Following the founding of FTX, he ascended to a top executive position and, on paper, became a billionaire. Throughout the years, he made significant campaign contributions to support left-leaning political groups.

During Mr. Bankman-Fried’s trial last fall, Mr. Singh provided extensive testimony regarding FTX’s collapse, revealing that the company’s downfall had driven him to suicidal thoughts. His lawyers, Andrew Goldstein and Russell Capone, emphasized his “immediate and exemplary” cooperation with the authorities.

Mr. Singh left FTX’s Bahamas headquarters before the company declared bankruptcy and began capturing screenshots of text messages crucial to the prosecution against Mr. Bankman-Fried, according to his legal team. They highlighted that Mr. Singh was not aware of the underlying conspiracy—specifically the misappropriation of billions in user deposits—until just two months prior to the company’s failure.

“His involvement was far less extensive than any other defendant,” his lawyers argued. “He has taken every possible step to make amends and rebuild his life.”

This defense played a pivotal role in determining Mr. Singh’s sentence.

“Your case differs significantly from Ms. Ellison’s,” Judge Kaplan remarked on Wednesday. “She was involved from the very beginning.”

Since FTX’s collapse, Mr. Singh has been residing in San Francisco with his fiancée, Claire Watanabe, who also worked at the exchange. His lawyers indicated he has secured a full-time position as a software engineer at a private company, where he has developed products recently showcased at an AI conference (the company’s name was not disclosed).

“Nishad has a bright future ahead of him, both in the short and long term, and he is gradually becoming the joyful young man he once was,” his lawyer stated.

In court on Wednesday, Mr. Singh was supported by his parents, younger brother, Ms. Watanabe, and a group of friends and extended family. “They have stood by me through it all,” he expressed in a brief speech to the judge. “I strive to be deserving of their love.”

Dressed in a light gray suit and dark red tie, Mr. Singh smiled as the sentence was read, while his friends and family embraced one another, tears in their eyes.

After delivering the sentence, Judge Kaplan addressed Mr. Singh’s parents, who sat in the front row, visibly emotional.

“I don’t see anything you did wrong,” he assured them.