FTX Sues 'Humpy the Whale' for $1 Billion Market Manipulation and Ties to Organized Crime

Last week, the estate of FTX filed lawsuits against a crypto trader known as Humpy the Whale. He’s accused of some serious misconduct. Between 2021 and 2022, he allegedly bought up large amounts of illiquid tokens, which drove their prices up. Then, he used those tokens to secure loans on the FTX exchange, loans that he never paid back.

According to the lawsuit, Humpy exploited a flaw in FTX's margin trading rules, resulting in losses of about $1 billion for both the exchange and Alameda Research.

The lawsuit is quite detailed. It includes a 32-page document listing eight charges against Humpy, whose real name is Nawaaz Mohammad Meerun. He’s a citizen of Mauritius. The suit claims that from January 2021 to September 2022, Meerun orchestrated multiple market manipulation schemes, defrauding FTX of hundreds of millions of dollars.

It doesn’t stop there. The filing also suggests that Meerun has connections to organized crime groups. It states, “Debtors have identified extensive ties to Polish, Romanian, and Ukrainian organized crime networks, including groups linked to human trafficking and Islamic extremist networks tied to terrorist financing.”

All in all, FTX and Alameda suffered around $1 billion in losses because of Meerun’s actions. He allegedly used the money from these exploits to fund other criminal activities.

In January 2021, Meerun started buying BTMX, an illiquid token. He eventually held about half of its supply, boosting its price by over 10,000% in just three months. He then used this stake as collateral to borrow tens of millions from FTX.

According to the lawsuit, “Meerun knew that once his manipulation stopped, BTMX’s price would crash, and he would have to return all of his 'borrowed' assets. But he had no intention of following FTX’s rules.” After some failures on FTX's part, Meerun walked away with over $450 million from BTMX. FTX employees allegedly tried to cover this up by shifting the losses to Alameda Research.

At the same time, the suit claims that Meerun built a significant short position in MOB, which Alameda also took on. To cover this short position, Alameda purchased large amounts of the token.

During this buying spree, MOB’s price spiked by 750%. This forced Alameda to pay much higher prices, only for the price to collapse shortly after they slowed down their buying. By the time everything settled in August 2021, Alameda estimated a loss of $1 billion due to Meerun’s actions.

In August 2021, Meerun used new accounts and aliases to repeat his scheme with other illiquid tokens, like BAO, TOMO, and SXP. He made off with nearly $200 million before FTX caught on. An attempt to exploit a token called KNC was stopped while it was still in progress.

The filing also highlighted Meerun's governance attack on Compound Finance. Under the alias “Humpy the Whale,” he accumulated significant holdings of the COMP token, which allows holders to vote on governance proposals for the decentralized autonomous organization (DAO).

Meerun allegedly tried to divert more than $20 million in assets from other users. He used his influence to force a “peace treaty” with Compound, where he received additional payments in exchange for not exploiting the protocol further.

As Humpy, Meerun proposed creating a new yield-bearing protocol called goldCOMP, backed by a group of COMP holders known as the Golden Boys. Critics labeled this a governance attack, pointing to the coordinated efforts between Humpy and the Golden Boys. They raised concerns about vote manipulation and the potential mismanagement of the $24 million COMP treasury funds.

Ultimately, Humpy and the group agreed on a counter-proposal to create a staking product. This would distribute 30% of existing and new market reserves annually to staked COMP holders, based on their stake controlled by the Compound DAO.

CoinDesk reached out to Meerun for comments via the email addresses listed in the filing.