In a stunning turn of events, a lawsuit filed by FTX’s successors last week has implicated a notorious crypto whale known as “Humpy” in a sprawling scheme that allegedly cost the failed exchange and its sister company, Alameda Research, a staggering $1 billion in losses. The 32-page complaint, submitted to the U.S. Bankruptcy Court in Delaware, paints a disturbing picture of market manipulation, illicit ties to organized crime, and a brazen attack on the decentralized governance of a major lending platform.
The Billion-Dollar Scheme
According to the lawsuit, the defendant, identified as Navaaz Mohammad Miroon, a citizen of Mauritius operating under the pseudonym “Humpy the Whale,” orchestrated a series of elaborate market manipulation schemes between January 2021 and September 2022. These schemes allegedly involved accumulating massive positions in illiquid tokens, driving up prices, and then exploiting loopholes in FTX’s margin trading rules to borrow hundreds of millions of dollars that were never repaid.
The complaint details how Miroon allegedly began by amassing a substantial stake in BTMX, an illiquid token, eventually holding nearly half of its supply and fueling a staggering 10,000% price surge over just three months. He then purportedly capitalized on deficiencies in FTX’s margin trading policies, using his inflated BTMX holdings as collateral to borrow tens of millions of dollars from the exchange.
“Miroon knew that as soon as his manipulation ended, the price of BTMX would collapse, and he would need to return all of his ‘borrowed’ assets. But Miroon had no intention of playing by FTX’s rules,” the lawsuit asserts.
Following alleged missteps by FTX, the complaint states that Miroon absconded with over $450 million worth of BTMX. FTX staff purportedly attempted to conceal this by shifting the losses to subsidiary Alameda Research, employing what the lawsuit describes as a “now all-too-familiar playbook.”
The MOB Token Manipulation
Simultaneously, Miroon allegedly built a substantial short position in another token called MOB, which Alameda was also shorting. In an effort to cover Alameda’s short position, the firm reportedly acquired significant quantities of MOB tokens.
“The price of MOB skyrocketed by 750% over the course of Alameda’s week-long buying spree, forcing Alameda to pay vastly inflated prices, then crashed soon after Alameda’s buying slowed. By the time the dust settled around the BTMX/MOB situation in August 2021, Alameda staff calculated that Alameda had already lost $1 billion due to Miroon’s actions,” the complaint states.
Repeated Schemes and Compound DAO Attack
Using new accounts and aliases, Miroon allegedly repeated the scheme in August 2021 with illiquid tokens BAO, TOMO, and SXP, making off with nearly $200 million before FTX caught on. A subsequent attempt to replicate the ploy with a token called KNC was reportedly thwarted mid-operation.
Beyond the alleged connections to organized crime, which the complaint does not elaborate on, the lawsuit also highlights how Miroon, under the moniker “Humpy Whale,” launched a “governance attack” on lending platform Compound Finance, leveraging his COMP tokens, which grant holders voting rights on decentralized autonomous organization (DAO) governance proposals.
“Miroon amassed significant quantities of the protocol’s governance token and then attempted to divert over $20 million of assets from other protocol users,” the complaint alleges. “Miroon then leveraged his influence to force Compound into a ‘peace treaty’ under which he received additional payments in exchange for no longer attempting to exploit the protocol.”
Under the pseudonym Humpy, Miroon submitted a DAO proposal to create a new yield-bearing protocol called goldCOMP, garnering support from a group of COMP holders known as the Golden Boys. While they blamed the viability of their actions on a lack of activity and participation in the DAO, critics denounced it as a governance attack due to the coordinated efforts between Humpy and the Golden Boys to push through the proposal. Concerns were also raised about vote manipulation by the proposal’s authors, the centralization of control, and potential risks of mismanagement of COMP’s $24 million treasury funds.
Ultimately, Humpy and his cohort agreed to a counterproposal to create a staking product that annually distributes 30% of existing and new market reserves to COMP stakers, proportional to their staked share, overseen by the Compound DAO.
As the legal proceedings unfold, the crypto community eagerly awaits further details on the extent of Humpy the Whale’s alleged manipulation, his ties to organized crime, and the full scope of the impact on FTX, Alameda Research, and the wider digital asset market. The case serves as a stark reminder of the vulnerabilities that persist in the largely unregulated crypto space and the immense power wielded by whales capable of moving markets and exploiting protocol weaknesses for personal gain.
