Cryptocurrency derivatives exchange FTX and trading firm Alameda Research LLC have been hit with a $150 million lawsuit filed by Bitcoin Manipulation Abatement LLC, over alleged market manipulation attempts.
According to Law360 FTX and Alameda – which share their CEO – tried twice to manipulate the Bitcoin futures market on leading cryptocurrency exchange Binance, but failed to do both times as the platform’s security mechanisms thwarted the moves.
The lawsuit reads:
Both times, defendants, and each of them, were caught by Binance’s market surveillance functionality and their manipulation attempts were thwarted.
It seems to be referring to an attempted attack Binance’s CEO Changpeng Zhao tweeted about back in September, where he said a “market maker from a smaller futures exchange” tried to manipulate the market on Binance, but failed to do so and “lost a bunch of money.”
Binance’s CEO mentioned in the tweet that none of its traders were liquidated during the attempted attack:
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
Later on Zhao claimed to have had a chat with the trader behind the “attack,” and said it was seemingly an accident caused by a “bad parameter on their side.” He added it wasn’t an intentional hit on Binance, but the lawsuit seems to say otherwise and goes to state the actions were “malicious, willful and deliberate.”
The goal of speaking to Zhao, the lawsuit adds, was in hopes of not seeing its Binance account terminated, so that the defendants could “continue unlawful and fraudulent price manipulation.”
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. pic.twitter.com/QSh39UeMwQ— Samuel McCulloch (@traders_insight) November 3, 2019
Law360 writers that FTX may have even used “multiple brokerage accounts to carry out a variety of illicit manipulation tactics” both on spot and futures markets. While Binance hasn’t seemingly reacted to the lawsuit yet, Alameda has published a blog post about it.
In it, the firm denies the allegation and calls it a “nuisance suit” that’s “riddled with laughable inaccuracies.” Its post reads:
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 shitposted conspiracy theories on Twitter out of a desperate attempt to construe some sort of suit.
It's worth pointing out it’s currently unclear who the plaintiff, Bitcoin Manipulation Abatement LLC, is.