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Crypto derivatives platform FTX Trading and its partner firm Alameda Research were named as defendants in a new lawsuit alleging market manipulation. Bitcoin Manipulation Abatement LLC filed the case in San Francisco.
Plaintiff lays out allegations
According to the plaintiff, Alameda, FTX and several of their associates are well known in the crypto ecosystem as Bitcoin spot and derivatives markets manipulators. The Monday filing in a San Francisco court alleges,
“During the time period from about November 20, 2017, and until present time… Defendants…Bankman-Fried, Wang, Croghan, CWang, Wong, and Ellison conspired…and participated in a long-running enterprise…engaging in a continuing pattern of racketeering activity involving, among other unlawful acts, operating an unlicensed money transmitting business.”
The plaintiff accused the defendants of wire fraud, money laundering, and transport of stolen property across the state and participation in a fraudulent, deceptive and manipulative scheme to affect the price of digital currency spot markets and derivatives markets including Bitcoin swaps and Bitcoin futures contracts.
The filing further states that the magnitude of illicit activities by the defendants is huge. It claims that the manipulation activity was being carried on at least 35 different derivatives exchanges. This included the names of the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME).
Major allegations piling up
The suit further accuses that the defendants have made unlawful profits from their activities to the tune of $150 million. They misappropriated this money using many crypto traders. The plaintiff further notes that their plan came to a screeching stop after Binance launched its own Bitcoin derivatives trading platform and their internal controls prevented manipulation.
The defendants tried to manipulate Bitcoin futures prices on Binance twice. In their first attempt, they tried to dump futures contracts for 255 BTC right when the Binance SAFU futures market opened. They intended to create an artificial price movement on the exchange that could execute some stop-loss orders and liquidate long positions on the asset.
The effect would have soon cascade to other exchanges, causing mass manipulation. They were using strategically timed trades on new markets to make their liquidation cascade effect work. Binance market surveillance thwarted their attempts on both occasions.
Alameda Research, which was incubated by FTX, slammed the lawsuit in a blog post and called the plaintiff a troll. It said that the lawsuit is filled with inaccuracies and doesn’t understand Alameda’s business model.