In a stunning turn of events, the notorious crypto trader known as “Humpy the Whale” has been named as a key figure in the collapse of crypto exchange FTX and its sister company Alameda Research. Lawsuits filed by FTX’s bankruptcy estate last week allege that Humpy, whose real name is Nawaaz Mohammad Meerun, orchestrated a series of market manipulation schemes that ultimately cost FTX and Alameda over $1 billion in losses.
The Anatomy of a Crypto Manipulation Scheme
According to the 32-page filing in the U.S. Bankruptcy Court for the District of Delaware, Meerun began his manipulation in January 2021 by accumulating massive positions in illiquid tokens such as BTMX, BAO, TOMO, and SXP. By controlling a significant portion of the supply, he was able to artificially inflate prices by as much as 10,000% in a matter of months.
Meerun then allegedly exploited a loophole in FTX’s margin trading rules, using his inflated token holdings as collateral to borrow tens of millions of dollars from the exchange. When the token prices inevitably crashed, Meerun absconded with the borrowed funds, leaving FTX holding the bag.
Meerun knew that as soon as his manipulation ceased, the price of BTMX would collapse and he would be required to return all of his “borrowed” assets. But Meerun had no intention of complying with FTX’s rules.
FTX Bankruptcy Filing
The filing alleges that Meerun repeated this scheme multiple times, ultimately costing FTX and Alameda over $1 billion in losses. FTX staff attempted to conceal the extent of the damage by transferring losses to Alameda, using what the filing describes as a “now-familiar procedure.”
Links to Organized Crime and Terrorism
Perhaps even more shocking than the financial impact are the lawsuit’s allegations that Meerun has ties to organized crime networks in Eastern Europe and Islamic extremist groups involved in terror financing. While the filing does not provide detailed evidence of these connections, it paints a disturbing picture of the shadowy underworld that exists in certain corners of the crypto space.
The Debtors have also identified close ties to Polish, Romanian and Ukrainian organized criminal networks, including groups connected to Human trafficking, as well as to Islamic extremist networks with links to terrorism financing.
FTX Bankruptcy Filing
These allegations, if proven true, would represent a troubling convergence of financial crime and violent extremism, with the crypto ecosystem serving as a conduit for illicit funds.
The Compound DAO Governance Attack
Meerun’s alleged misdeeds were not limited to market manipulation on centralized exchanges. Earlier this year, operating under the alias “Humpy the Whale,” Meerun made headlines for executing a so-called governance attack on the decentralized finance (DeFi) platform Compound.
By accumulating a large position in Compound’s COMP governance token, Meerun and a group of aligned voters known as the “Golden Boys” were able to submit and approve a proposal to create a new yield protocol called goldCOMP. Critics decried the move as a hostile takeover attempt, with concerns over voting manipulation, centralized control, and potential mismanagement of Compound’s $24 million treasury.
Meerun accumulated substantial holdings in the protocol’s governance token and then sought to misappropriate over $20 million in assets from other protocol users.
FTX Bankruptcy Filing
While a counter-proposal ultimately prevented the most drastic changes, the incident served as a wake-up call about the vulnerabilities of on-chain governance models and the potential for malicious actors to subvert the intended functioning of DeFi protocols.
The Fallout and Future Implications
The revelations about Humpy the Whale’s alleged market manipulation and criminal ties have sent shockwaves through the crypto community, raising fresh concerns about the industry’s susceptibility to bad actors and illicit activity.
For FTX and its creditors, the lawsuits represent an attempt to recover some of the billions in losses incurred during the exchange’s implosion. However, even if successful, the legal process is likely to be lengthy and contentious, with no guarantee of full restitution.
More broadly, the Humpy the Whale saga underscores the urgent need for more robust regulatory frameworks and enforcement mechanisms in the crypto space. While the decentralized nature of the technology is often touted as a virtue, it can also create opportunities for manipulation and malfeasance that are difficult to detect and prevent.
As the crypto industry continues to mature and push for mainstream adoption, addressing these vulnerabilities will be critical to building trust and stability. Whether through stronger KYC/AML procedures, enhanced market surveillance, or more effective on-chain governance models, the lessons of Humpy the Whale must be learned if crypto is to fulfill its transformative potential.
For now, though, the story serves as a cautionary tale about the dangers lurking in the depths of the crypto ocean – and the potential for even the biggest players to be capsized by a rogue whale on the hunt for illicit gains.
