"Case within a case" emerges in the FTX bankruptcy case: a trader suspected of manipulating the market to profit hundreds of millions of dollars by exploiting loopholes.

As the investigation into the FTX bankruptcy case deepens, some unknown insider information is gradually coming to light. Recently, a lawsuit involving a trader named Nawaaz Mohammad Meerun has attracted widespread attention. This trader is accused of exploiting loopholes in a trading platform to manipulate the market, profiting up to hundreds of millions of dollars. This article will analyze this incident in depth, providing a warning for the crypto market.

Manipulating the Market with Low Liquidity Tokens

According to the court documents from the bankruptcy court in Delaware, USA, Meerun is a citizen of Mauritius who has been accused of being a "veteran" in market manipulation. He mainly focuses on manipulating tokens with low liquidity and is suspected of being involved in multiple cases of money laundering and Ponzi schemes.

Starting from January 2021, Meerun began to buy a large amount of BTMX tokens, ultimately accumulating about half of the token supply. This caused the price of BTMX to skyrocket by 10,000% within three months. Subsequently, Meerun exploited a trading platform's leverage feature and the loopholes in margin trading rules to borrow tens of millions of dollars using BTMX as collateral.

Despite the fact that relevant parties identified the issue and issued warnings, the platform took no action. It is reported that a certain executive chose to ignore the alerts of suspicious activities until the scale of the problem expanded to at least $400 million, at which point they realized the severity.

Continue to repeat the operation using other tokens

From August to December 2021, Meerun again used new accounts and aliases to repeatedly carry out the aforementioned operations on low liquidity tokens such as BAO, TOMO, and SXP. Before the platform realized the issue, he had already profited nearly 200 million dollars through this means.

What is even more surprising is that even after the issues were discovered, the platform did not fully restrict Meerun's account operations, allowing him to successfully transfer over $450 million in illegal proceeds.

Use short-selling strategies to force the opposing party to invest heavily

The lawsuit documents also indicate that Meerun shorted a token named Mobile Coin (MOB) on the platform. To cover these short positions, a trading firm began to buy large quantities of MOB tokens from the market, causing its price to surge by 750% over several weeks. This operation is estimated to have resulted in losses of up to $1 billion for the firm.

Meerun's Response

In response to these accusations, Meerun denied market manipulation, claiming that he has always operated within the platform's regulations and stated that the trades on the platform were actually losses. He also denied any association with criminal networks.

However, the lawsuit documents show that Meerun was once suspected of participating in a "governance attack" on a lending platform, attempting to influence platform decisions by accumulating a large amount of governance tokens.

Event Alert

This event has sounded the alarm for the cryptocurrency industry, providing valuable lessons learned:

1. The trading platform needs to完善KYC procedures, strictly implement anti-money laundering regulations, and prevent criminals from using the platform for illegal activities.

2. Strengthen internal controls and employee training to prevent negligence or inaction by internal personnel from providing opportunities for criminals.

3. Establish and improve a risk assessment system, conduct regular business risk assessments, and pay special attention to unusual transactions of low liquidity assets.

4. Investors should be wary of the price anomalies of low liquidity tokens and pay attention to large on-chain transfer activities.

5. Prefer to invest in trading platforms that operate within regulated jurisdictions and have obtained the necessary certifications.

This event highlights once again the vulnerability of the cryptocurrency market and the importance of regulation. Only by continuously improving regulatory mechanisms and strengthening industry self-discipline can we establish a healthier and safer crypto ecosystem.