Meerun stole $1.2 billion from FTX by taking advantage of the same loophole three times

The thief is simple...

Author: Nanzi

Original: Odaily Planet Daily

Cover: Photo by Towfiqu barbhuiya on Unsplash

Last week, a court filing by FTX showed that a Mauritian citizen named Nawaaz Mohammad Meerun (hereinafter referred to as Meerun) extracted $1.2 billion from the FTX exchange and Alameda Research within a year, but never left any conclusive evidence.

Initial Appearance: The Mysterious Whale Stole 450 Million Dollars

Meerun's first battle occurred in January 2021, when he chose an extremely low-liquidity token BTMX as his first prey. Over the course of two months, he continuously bought BTMX through the BitMax and FTX platforms, eventually controlling about 50% of the total supply. Driven by Meerun, the price of BTMX soared from $0.03 to $3, a staggering increase of 10,000%.

Thereafter, Meerun exploited the margin trading loophole in FTX's system, using the artificially inflated BTMX as collateral to borrow billions of dollars. Subsequently, he quickly withdrew the funds, transferring $450 million to multiple wallet addresses.

The lawsuit states: "Meerun clearly knew that once his manipulation ceased, the price of BTMX would collapse, and he would need to return all the 'borrowed' assets. But Meerun never intended to comply with FTX's rules."

Although BitMax warned the FTX team about the abnormal transactions, the FTX management did not take any action. FTX locked his account but forgot to stop his withdrawal function. After Meerun cashed out and left, some employees even tried to shift this loss to Alameda Research to cover up the incident.

Alameda Becomes Meerun's ATM

After successfully manipulating BTMX, Meerun did not stop there. Instead, he turned to a different strategy - short selling. He targeted another obscure token, Mobile Coin (MOB).

Meerun first established a short position on MOB, accounting for about 10% of the total supply on FTX, and Alameda was forced to take on these positions. To cover the short positions, Alameda had to buy a large amount of the token.

The price of MOB skyrocketed 750% from $8 to $68 during Alameda's weeks-long buying frenzy, and Alameda paid a significant premium. After Alameda slowed down its buying, the price quickly plummeted. Ultimately, this trade cost Alameda around $1 billion, while Meerun successfully cashed out again.

In August 2021, Meerun allegedly used new accounts and aliases to implement similar manipulation schemes with tokens like BAO, TOMO, and SXP, which have relatively low liquidity, and made nearly $200 million in profits before FTX detected it.

KNC Incident: The Last Attempt, Failed (Or Not?)

After multiple successes, Meerun again set his sights on the KNC token. He meticulously set up a complex account structure, using stolen or forged KYC materials, fake addresses, and non-existent postal codes to open FTX accounts. He also established 64 sub-accounts under the main account to circumvent FTX's collateral limits.

Next, he made large purchases of another low-liquidity token KNC, buying through multiple accounts simultaneously to drive up the price, ultimately controlling around 70% of the circulating KNC supply, artificially inflating the price to increase the nominal value of the collateral, and then leveraging the aggregation calculation loophole in the FTX margin system to distribute his KNC holdings across multiple sub-accounts, using the artificially inflated KNC as collateral to borrow funds, in an attempt to withdraw as much money as possible before the price collapse. However, this time, a junior employee at FTX discovered the correlation in the fund flows, identified the connection to the previous operation, and FTX promptly took account freezing measures and implemented new margin trading restrictions.

Thereafter, FTX gradually became aware of Meerun's model, yet he still managed to withdraw $68 million.

Criminal Network and Mysterious Figures

FTX's lawsuit not only accuses Meerun of market manipulation, but also links him to organized crime groups in multiple countries. The allegations include:

• Connections to criminal networks in Poland, Romania, and Ukraine involving human trafficking and money laundering.
• Associations with Islamic extremist groups, potentially involved in terrorist financing.

Facing these allegations, Meerun has consistently denied them. He claims his transactions on FTX were fully compliant with the rules, and even emphasizes that he suffered losses in the trades. He states: "I have no connection to any organized crime network, nor have I ever funded extremism or terrorism."

Interestingly, according to @LouisOrigny, Meerun had submitted a $12 million claim against FTX's bankruptcy creditors in 2024.

I can only say, he played the system well...

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