FTX and Alameda Sued for $1 Billion Losses Caused by Humpy the Whale
Last week, lawsuits were filed against Compound DAO governance exploiter Humpy the Whale by FTX’s estate. Humpy the Whale, also known as Nawaaz Mohammad Meerun, a Mauritian citizen, is accused of orchestrating market manipulation schemes that defrauded FTX of hundreds of millions of dollars between January 2021 and September 2022.
The lawsuit alleges that Humpy the Whale used illiquid tokens to pump prices, took out loans on FTX using these tokens as collateral, and failed to repay them, resulting in $1 billion in losses for FTX and Alameda Research. The suit also claims that Humpy the Whale has ties to organized crime groups, including those involved in human trafficking and terrorist financing.
In January 2021, Humpy the Whale began accumulating BTMX tokens, driving up the price by over 10,000% in three months. He then exploited a flaw in FTX’s margin trading rules to borrow tens of millions of dollars from the exchange using his stake as collateral. When the manipulation stopped, BTMX’s price crashed, and Humpy the Whale made off with over $450 million from the token.
FTX personnel attempted to cover up the losses by shifting them to sister company Alameda Research. Alameda assumed a huge short position in MOB, which resulted in significant losses when the token’s price spiked by 750% during Alameda’s buying spree. Humpy the Whale repeated this scheme with other illiquid tokens, making off with nearly $200 million before being caught.
In addition to these actions, Humpy the Whale executed a governance attack on Compound Finance using its COMP token. He accumulated significant holdings of COMP and diverted over $20 million in assets from other users. Humpy the Whale also submitted a DAO proposal to create a new yield-bearing protocol called goldCOMP, which raised concerns about governance manipulation and the centralization of control.
Despite these allegations, Humpy the Whale and the Golden Boys, a group of COMP holders, agreed to a counter-proposal to distribute 30% of market reserves annually to staked COMP holders controlled by the Compound DAO.
The lawsuits filed against Humpy the Whale shed light on the risks and vulnerabilities present in the cryptocurrency industry. Market manipulation, governance attacks, and ties to organized crime pose significant challenges to the integrity and security of crypto exchanges and platforms. It is essential for regulators and industry players to address these issues to protect investors and maintain trust in the market.