In a shocking revelation, a lawsuit filed by the estate of failed crypto exchange FTX has shed light on the alleged misdeeds of a notorious crypto trader known as “Humpy the Whale.” The 32-page document, submitted to the US Bankruptcy Court for the District of Delaware, accuses Nawaaz Mohammad Meerun of orchestrating elaborate market manipulation schemes that resulted in a staggering $1 billion loss for FTX and its sister company, Alameda Research.
The Illiquid Token Ploy
According to the lawsuit, Meerun’s modus operandi involved amassing substantial positions in illiquid tokens, such as BTMX, and then artificially inflating their prices. In January 2021, he allegedly accumulated nearly half of the BTMX supply, driving its price up by an astonishing 10,000% within just three months. Leveraging this manipulated stake as collateral, Meerun purportedly borrowed tens of millions of dollars from FTX, exploiting a flaw in the exchange’s margin trading rules.
Meerun knew that once his manipulation ceased, the price of BTMX would crash, and he would need to return all of his ‘borrowed’ assets. But Meerun had no intention of playing by FTX’s rules.
– Excerpt from the lawsuit
The suit claims that Meerun ultimately extracted over $450 million from the BTMX scheme, leaving FTX scrambling to cover the losses by shifting them to Alameda Research. But the manipulative tactics didn’t stop there.
A Web of Manipulative Trades
Meerun allegedly established a large short position in another token called MOB, which Alameda had also taken a position in. As Alameda attempted to cover its short position by buying up MOB tokens, the price surged by 750%, forcing the company to pay exorbitant prices. Once Alameda slowed its buying, the token’s value plummeted, leaving the firm with an estimated $1 billion loss.
Using new accounts and aliases, Meerun purportedly repeated this scheme with other illiquid tokens like BAO, TOMO, and SXP, raking in nearly $200 million before FTX caught on. An attempt to manipulate yet another token, KNC, was apparently thwarted mid-execution.
The Compound DAO Governance Attack
The lawsuit also highlights Meerun’s involvement in a governance attack on the Compound Finance platform under the pseudonym “Humpy the Whale.” By accumulating a significant portion of COMP tokens, which grant voting rights in the decentralized autonomous organization (DAO), Meerun allegedly sought to siphon over $20 million in assets from other users.
Meerun used his leverage to force a ‘peace agreement’ with Compound, in which he received additional payments in exchange for no longer seeking to exploit the protocol.
– Excerpt from the lawsuit
Critics dubbed the incident a governance attack due to the coordinated efforts between Humpy and a group of COMP holders known as the Golden Boys. Concerns were raised about voter manipulation, centralization of control, and potential risks of mismanagement of the $24 million COMP treasury funds.
Ties to Organized Crime and Terrorism
Perhaps most disturbingly, the lawsuit alleges that Meerun has extensive ties to Polish, Romanian, and Ukrainian organized crime networks, including groups linked to human trafficking. It further suggests connections to Islamic extremist networks associated with terrorist financing, painting a troubling picture of the far-reaching consequences of Meerun’s actions.
As the crypto community grapples with the fallout of FTX’s collapse and the revelations surrounding key figures like Meerun, the lawsuit serves as a stark reminder of the risks posed by bad actors in an often opaque and unregulated market. The full extent of the damage caused by “Humpy the Whale” may take years to unravel, but one thing is certain: the repercussions will be felt far and wide.
