In the past few weeks, the failed exchange FTX (November 2022) has filed 25 lawsuits against various individuals who received funds from FTX, including Anthony Scaramucci, the developers of the game StoryBook Brawl, a whale who embezzled hundreds of millions of dollars from FTX, and a bank manager. In the meantime, the bankruptcy judge has approved FTX's repayment plan to the debtors (users) giving 110% of the deposits but with the price dated November 2022 (so in full Bear Market).
SOME LAWSUITS
A.Scaramucci, B.Messing and their fund SkyBridge Capital are being sued for $100 million (a series of investments by Bankman in Scaramucci's properties), the lawsuit also seeks to recover $12 million from the Salt sponsorship. Also sued are the developers of the game Storybook Brawl, who allegedly received $25 million in investments from FTX and were paid $2 million in salaries, despite never having released the game (to date). Bahamian bank Deltec and its director Jean Chalopin have also already been sued. FTX invested $11.5 million in exchange for a 10% stake in the company, which owned Farmington State Bank, another defendant listed in the lawsuit. According to the lawsuit, FTX invested about $10 million for just a 10% stake. After the investment, Farmington changed its name to Moonstone, and once federal authorities seized $50 million of FTX’s equity held in the bank, it attempted to revert to its original branding, although it had allegedly violated regulatory restrictions in the process. The lawsuit seeks to recover the $11.5 million it invested in the bank.
THE COMPLAINT AGAINST HUMPY IS GOLD
This lawsuit concerns Nawaaz Mohammad Meerun: a whale known as Humpy Is Gold (who previously attacked the governance of Balancer and Compound). Humpy allegedly withdrew large amounts of funds from FTX starting in January 2021, via lending. He basically:
1) Created a fake identity using front men to bypass KYC rules
2) Build up a huge position in BTMX token (linked to a small exchange)
3) Purchased half of the BTMX supply, driving up the price by 10,000%
4) Leveraged FTX to borrow hundreds of millions of dollars against his BTMX collateral (which was worth next to nothing, as he had artificially driven up the price himself)
5) Withdrew massive amounts of crypto and stablecoins
Bitmax exchange contacted FTX to warn them that they had seen this suspicious behavior from these users! FTX did nothing and Humpy was allowed to manipulate more tokens on the platform. He started shorting Mobile Coin (MOB), FTX asked him to add more collateral but Meerun did not. While FTX tried to contact him, Meerun continued to withdraw tokens from the exchange. FTX then blocked his account, forgetting to block his withdrawals.
At this point Humpy withdrew $450 million. The exchange's reaction was to cover the losses and "divert" them to Alameda Research. In the meantime, Humpy signed up with other identities using email addresses such as "[email protected]" and "[email protected]"
continued to pump other degen coins (Tomo, Bao, Sxp) withdrawing another $200 million (about $1.2 billion in total). Even though an FTX employee caught him pumping KNC token, he allowed him to withdraw another $68 million. All over? Not really. Or rather, Humpy will never be caught until he submits a refund request for $12 million, this time signing up with his full name.
Beyond the large sums withdrawn from the exchange, it seems that for Humpy this is the least of his problems: his name would be associated with even more serious crimes such as fraud with Ponzi schemes a decade ago (outside the crypto world), money laundering and connections with criminal networks dedicated to human trafficking and terrorism.
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