New Scandal Erupts at FTX: A User Allegedly Manipulated the Market Through a Vulnerability to Profit Hundreds of Millions of Dollars

Recently, the cryptocurrency market has once again been shocked by the new developments in the FTX-related case. As the lawsuits deepen and more documents are disclosed, some unknown insider information is gradually coming to light.

According to reports, FTX is suing a user named Nawaaz Mohammad Meerun, accusing him of exploiting platform vulnerabilities for market manipulation, resulting in profits of hundreds of millions of dollars. This case has garnered widespread attention in the crypto community, not only because of the shocking methods employed by the individual involved but also due to some perplexing practices by FTX itself.

Low Liquidity Token Manipulation Techniques

According to documents from the bankruptcy court in Delaware, USA, Meerun is a citizen of Mauritius and is described as an "old hand" at market manipulation. He primarily focuses on illiquid tokens and is suspected of participating in various money laundering activities and Ponzi schemes over the years.

Starting in January 2021, Meerun began to buy large amounts of BTMX tokens, eventually accumulating nearly half of the token's supply. This led to a price surge of 10,000% within three months. Subsequently, he exploited the leverage features and margin trading loopholes of a certain trading platform to borrow tens of millions of dollars using BTMX as collateral.

Despite warnings being issued to a certain trading platform, the platform took no action. It is reported that the person in charge simply commented, "Oh, I didn't realize the account had become so crazy."

From August to December 2021, Meerun repeated the above operations on low liquidity tokens such as BAO, TOMO, and SXP using new accounts and aliases. He had defrauded nearly $200 million in this way before a trading platform became aware of the issue.

Short Selling Strategies and Alameda Research

The lawsuit documents also pointed out that Meerun shorted a token called Mobile Coin (MOB), which has a very low value, on a certain trading platform. Surprisingly, the trading platform has not taken any action against Meerun, only asking him to provide more collateral.

Due to Meerun and Alameda Research holding large short positions in MOB, Alameda began purchasing MOB tokens in large quantities from the market to cover these shorts. During Alameda's weeks-long buying spree, the price of MOB skyrocketed by 750%. When Alameda slowed down its purchases, the price of MOB eventually collapsed. It is estimated that by the end of the event in August 2021, Alameda lost as much as $1 billion due to Meerun's actions.

Warning to the Market

The market manipulation techniques of Meerun mainly include:

1. Accumulate a large amount of low liquidity tokens, drive up the price, and then use them as collateral to borrow funds and cash out.
2. Establish a large number of short positions, forcing other institutions to invest heavily to close their positions.
3. Simultaneously manipulate multiple low liquidity tokens and repeat the above method.

This event has sounded the alarm for the cryptocurrency industry and provided valuable lessons.

For trading platforms, it is necessary to improve KYC procedures, strictly enforce identity verification and anti-money laundering regulations. Strengthen internal personnel supervision and establish a sound risk assessment system, especially to enhance monitoring of low liquidity assets.

Investors should be wary of unusual price fluctuations in low liquidity tokens, pay attention to on-chain activities of large accounts, and prioritize regulated trading platforms.