U.S. regulators seek to crack down on cryptocurrency exchanges in the wake of the most recent bankruptcy case filed by FTX Trading Ltd., and a class action lawsuit has been launched against the former FTX CEO Sam Bankman-Fried (SBF) and 12 celebrities. However, FTX and Alameda Research have dealt with the American legal system and financial inquiries before. Following the debut of FTX in 2019 and the introduction of the exchange token FTT, FTX and Alameda were the subject of a lawsuit, which was filed on November 2, 2019, accusing the businesses and their officials of engaging in racketeering operations and manipulating the cryptocurrency market.
In a lawsuit filed in 2019, FTX and Alameda executives were accused of violating racketeering laws and “aiding and abetting price manipulation.”
After Alameda Research’s balance sheet was made public and Binance CEO Changpeng Zhao (CZ) said Binance was selling all of its FTT tokens, FTX, Alameda Research, Sam Bankman-Fried (SBF), and the company’s related officials have been in the news for the past two weeks. Since FTX Trading Ltd. and more than 130 affiliated entities filed for Chapter 11 bankruptcy protection, authorities from numerous jurisdictions are presently looking into the firms.
Many people are unaware that FTX was charged with racketeering, selling unregistered securities, and manipulating the cryptocurrency market three years ago. This is true even though investigators are shining their magnifying glasses and attorneys are preparing written defenses. On November 2, 2019,was registered by attorneys for Bitcoin Manipulation Abatement LLC (BMA) by attorneys
In the complaint, racketeering and “aiding and abetting price manipulation” were charged against FTX, Alameda Research, SBF, Gary Wang, Andy Croghan, Constance Wang, Darren Wong, and Caroline Ellison. It’s interesting to note that the lawsuit claims that Alameda’s unregulated over-the-counter (OTC) money transmission operation is what allowed FTX to succeed.
According to the lawsuit, “racketeering activities topped $150,000,000 and involved the misappropriation of funds from several cryptocurrency traders.” An alleged attempt by Alameda to manipulate the bitcoin futures market, namely the Binance SAFU futures market, is the key piece of evidence cited by BMA in the case.
On September 15, 2019, 255 bitcoins were allegedly dumped on the BTC futures market in a “two-minute time span,” according to BMA. BMA further asserts that after the incident on September 15, 2019, SBF moved his location from Berkeley, California, to Hong Kong on online accounts. In addition, the lawsuit asserts that FTX and Alameda Research are one business, not two distinct ones.
The lawsuit’s filing stated that “defendant Alameda was kept secret by [the] defendants, and each of them, starting from its conception on November 20, 2017, and until 2018, after the defendants, and each of them, made the business decision to expand and [the] business decision to enhance their automated OTC business for bitcoin and other cryptocurrencies.
A court document claims that Binance CEO CZ was aware of the incident in September of 2019
The court documents further imply that Changpeng Zhao (CZ), the CEO of Binance, was aware of the futures trade on September 15, 2019, which BMA described as “illicit price manipulation.” CZ’s tweets from the time of the incident in September 2019 are included in the file, and some fans of the cryptocurrency industry think that’s what started the animosity between FTX and Binance management.
On September 15, 2019, CZ tweeted that he had a chat with “the client,” who claimed that the incident was an accident brought on by a poor parameter on their end. The official from Binance said it was “not intended” and that everything was “ok now.” Alameda Research was listed among the top traders on the cryptocurrency derivatives platform Bitmex, according to the lawsuit.
In addition, Alameda was charged in BMA’s lawsuit of frequently using and switching between different trading accounts. Alameda was the third-best trader by notional volume on Bitmex’s trader leaderboard in 2019 with BTC trade volume totaling $154 million.
In the case, unauthorized money transfer, racketeering, the sale of unregistered securities, wire fraud, price manipulation, and “at least two acts of interstate transportation of stolen property” were charged against SBF, FTX, Alameda, and related executives. The defendants were each “liable, jointly and severally,” according to BMA’s attorneys, and for “amount of threefold of BMA’s losses, which is $41,189,266.80.”
BMA “is entitled to punitive damages in the amount of $150,000,000,” the complaint states in its conclusion. A summons was allegedly sent to FTX, Andy Croghan, Caroline Ellison, Constance Wang, Gary Wang, Darren Wong, Alameda Research, and SBF on November 5, 2019, following the filing’s registration. Executives at FTX denied receiving a summons at the time. The case did not persist very long despite the numerous accusations made against FTX, Alameda, and its related personnel.
Case Against FTX and Alameda Execs Quickly Closes With Prejudice and Through Voluntary Dismissal
The lawsuit was closed with prejudice on December 16, 2019, following the submission to the court of a notice of voluntary dismissal. On social media, SBF had tweeted about the case’s dismissal, and the former CEO of FTX’s tweet prompted a blog post named the “nuisance suit” about the case’s dismissal. According to the blog post, executives were not served, and an online lawyer-written lawsuit against Alameda has been making the rounds.
The blog post asserted at the time that the “nuisance suit” was a hoax made up by a “troll” and that it contained no supporting evidence. The author of the blog post maintains that “the nuisance complaint is rife with comical falsehoods, including mistaking the whole economic strategy of Alameda.” The author of the blog article continues:
The troll has no evidence of any wrongdoing, and will not further discover any — because there was no wrongdoing to discover evidence of. Instead he attempts to cite the analysis of sh**posted conspiracy theories on Twitter out of a desperate attempt to construe some sort of suit.
When the complaint was brought, FTX was significantly smaller, and it took another two years for it to grow to its current $32 billion size. Compared to the current media coverage FTX and its affiliated corporations are receiving, the BMA case received virtually little coverage. The final statement in the blog post published by SBF on Nov. 3, 2019, insists that neither Alameda nor any of the other defendants identified have ever artificially inflated the price of bitcoin or any other cryptocurrency.
The BMA lawsuit was dismissed as a “conspiracy theory,” much like a plethora of hypotheses that have been discussed over the past few years, and SBF went on to become one of crypto’s top influencers and was compared to financial titans like J.P. Morgan a few weeks before his exchange crashed.
What do you think of the lawsuit FTX, Alameda, and SBF were subjected to back in November 2019? Please share your opinions on this topic in our blog comments box below.