Court filings continue to shed light on the dubious relationship between FTX and Alameda Research, in which the hedge fund was afforded an “unfair” trading advantage as well as unprecedented access to user holdings on the cryptocurrency exchange.
The United States Commodities Futures Trading Commission filed a complaint in the Southern District Court in New York on Dec. 1, alleging a host of irregular business dealings between Sam Bankman-Fried’s cryptocurrency exchange FTX and his trading company Alameda Research.
The complaint provides a raft of allegations detailing how the two companies and select insiders including Bankman-Fried violated the Commodity Exchange Act and various regulations. This comes after the former CEO was arrested in the Bahamas on Dec. 12 and is set to be extradited to the United States.
The CFTC highlights how Bankman-Fried owned and operated FTX.com and its associated subsidiaries as well as Alameda and its related entities, from May 2019 to their collapse in November 2022.
Alameda operated as a primary market maker on FTX.com, which provided liquidity to its cryptocurrency markets. The companies operated as a “common enterprise,” but the CFTC alleges that this was abused in a number of ways.
According to the filing, a small circle of insiders were involved in allowing FTX customers’ deposits, including fiat currency, Bitcoin (BTC) and Ether (ETH), to be “accepted, held by, and/or appropriated by Alameda” for its own use.
Furthermore, the CFTC claims that FTX executives created features in the exchange’s code that allowed “Alameda to maintain an essentially unlimited line of credit on FTX.”
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