FTX, a crypto derivatives platform incubated by Alameda Research, is the target of a new $150 million lawsuit accusing it of market manipulation and the sale of unlicensed securities in the US. The complaint, which was brought to light on Twitter by Samuel McCulloch, host of the End of the Chain podcast, also contains passages alleging that FTX previously attempted to “attack” Binance.
McCulloch also pointed out that among other things, “the complaint alleges that @FTX_Official ran an unlicensed money transmitting business with its OTC desk.”
Changpeng Zhao, CEO of Binance, also tweeted about the lawsuit, saying that it didn’t seem very credible.
“Only scanned through the parts that explicitly had the word Binance. Honestly, all seems very far fetched. We have resolved the issues long ago,” he wrote on Twitter.
FortuneZ reached out to FTX, who told us that “we agree with Binance that this issue has been resolved and was a misunderstanding.”
Who is “Bitcoin Manipulation Abatement LLC”?
The complaint was filed by one “Pavel I. Pogodin, Ph. D, Esq.,” acting as an attorney through his company, Consensus Law, for “Bitcoin Manipulation Abatement LLC,” an unknown entity with virtually no online presence.
(However, public records show that there is a Bitcoin Manipulation Abatement LLC that was formed in March of 2019 with “Pogodin, Pavel” listed as the residing agent.)
Bitcoin Manipulation Abatement LLC is demanding a whopping $150 million in punitive and exemplary damages due to alleged market manipulation on Binance.
— beginner (@EEE_DDD_FFF) November 3, 2019
“Defendants, and each of them, were caught red-handed when, at about 21:00 EDT on September 15, 2019, and acting in furtherance of the manipulative and deceptive scheme as alleged hereinabove, Defendants, and each of them, made two illicit unsuccessful attempts to manipulate prices of Bitcoin futures listed on Binance cryptocurrency futures exchange,” the complaint reads.
McCulloch explained in a Tweet that “the crux of the plaintiff’s argument is that FTX used its position to manipulate BTC prices using momentum ignition algos, with the goal of creating liquidation cascades. After rapidly moving prices, Defendants used multiple loser accounts to benefit a winner account.”
The complaint appears to be referring to a September incident
The complaint could be referring to a series of tweets that Binance CEO Changpeng Zhao made in mid-September. The tweets originally alleged that a “smaller futures exchange tried to attack @binance futures platform.”
A market maker from a smaller futures exchange tried to attack @binance futures platform. NO ONE was liquidated, as we use the index price (not futures prices) for liquidations (our innovation). Only the attacker lost a bunch of money, and that was that. pic.twitter.com/ztMZEtYKc6
— CZ 🔶 Binance (@cz_binance) September 16, 2019
However, CZ eventually posted that the “attack” was actually an accident and that the situation had been resolved. While CZ never named FTX specifically, there was the buzz that FTX was the client in question.
Alameda fires back
Alameda, the “incubator” of FTX, has responded to the complaint letter with a Medium post.
“Although we have not been served, a complaint written by a lawyer against Alameda has been circulating on the Internet,” the post reads, adding that “the nuisance suit is riddled with laughable inaccuracies, including mistaking the entire business model of Alameda.”
“It is an unfortunate reality that it is easy to file bullshit lawsuits and annoying to fight them, and some assholes will use this as an excuse to extort anyone they see as high profile,” the post says.