Alameda had 'unfair' trading advantage, special access to FTX funds: CFTC filing

Court filings proceed to shed airy connected the dubious narration betwixt FTX and Alameda Research, successful which the hedge money was afforded an ‘unfair’ trading vantage arsenic good arsenic unprecedented entree to idiosyncratic holdings connected the cryptocurrency exchange.

The United States Commodities Futures Trading Commission filed a ailment successful the Southern District Court successful New York connected Dec. 1, alleging a big of irregular concern dealings betwixt Sam Bankman-Fried’s cryptocurrency speech FTX and his trading institution Alameda Research.

The ailment provides a raft of allegations detailing however the 2 companies and prime insiders including Bankman-Fried violated the Commodity Exchange Act and assorted regulations. This comes aft the former CEO was arrested successful the Bahamas connected Dec. 12 and is acceptable to beryllium extradited to the U.S.

The CFTC highlights however Bankman-Fried owned and operated FTX.com and its associated subsidiaries arsenic good arsenic Alameda and its related entities from May 2019 to their illness successful November 2022.

Alameda operated arsenic a superior marketplace shaper connected FTX.com, which provided liquidity to its cryptocurrency markets. The companies operated arsenic a ‘common enterprise’, but the CFTC alleges that this was abused successful a fig of ways.

According to the filing, a tiny ellipse of insiders were progressive successful allowing FTX customers’ deposits, including fiat currency, Bitcoin (BTC) and Ether (ETH), to beryllium ‘accepted, held by, and/or appropriated by Alameda’ for its ain use.

Furthermore, the CFTC claims that FTX executives created features successful the exchange’s codification that allowed ‘Alameda to support an fundamentally unlimited enactment of recognition connected FTX.’ 

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Other exceptions were created that allowed Alameda to person ‘an unfair advantage’ erstwhile trading connected FTX. This included faster trading execution times arsenic good arsenic an exemption from the exchange’s ‘distinctive auto-liquidation hazard absorption process’.

Bankman-Fried and different Alameda enforcement besides allegedly directed the hedge money to usage FTX and idiosyncratic funds to commercialized connected extracurricular cryptocurrency exchanges and to money a ‘variety of high-risk integer plus manufacture investments’.

In addition, Bankman-Fried and different FTX executives took retired hundreds of millions of dollars successful poorly-documented ‘loans’ from Alameda. These funds were utilized to bargain luxury existent property and spot arsenic good arsenic to concern governmental donations.

Widespread misappropriation of lawsuit funds took spot portion FTX Trading claimed successful its presumption of work that customers owned and maintained power of assets successful their accounts and that these were safeguarded and segregated from FTX’s funds.