Outside Source
Sam Bankman-Fried (SBF), former CEO of the FTX crypto exchange, used his influence in the crypto industry to inflate some coins prices through a coordinated strategy with FTX’s sister company, Alameda Research, a New York Times report claimed on Jan. 18.
As a way to keep FTX and the companies under its umbrella profitable, Bankman-Fried allegedly approached developers behind projects, insisting that they make their trading debuts on the exchange’s platform. Following that, the report claimed that Alameda Research would buy some of these freshly listed coins to raise their value.
After attracting projects and using its hedge fund to prop up prices, Bankman-Fried allegedly relied on its popularity to advertise the projects, and persuade the crypto community to invest in those coins, known as ‘Samcoins’. As a result of the strategy, Alameda appeared to be in a stronger position than it actually was.
The newspaper compared Bankman-Fried strategy with a large scale pump-and-dump scheme. A stock market operation refers to an increase in stock value by insiders in order to entice retail investors. The insiders then sell their shares, and other investors are left with worthless stock.
Related: ‘There will be many more zeros’ — Kevin O’Leary on FTX-like collapses to come
Pump-and-dump schemes are illegal, and are especially problematic when scammers use false or misleading statements to attract investors to micro and small-cap stocks.
For developers launching a new coin, Bankman-Fried’s offer was an appealing option, as they could benefit from FTX recognition to advertise their tokens and get more attention from potential investors. Among the supposed “Samcoins” were Serum, Maps, Oxygen, Bonfida and Solana (SOL).
Sources interviewed by the NYT also noted that Bankman-Fried would offer a select group of investors the chance to buy in coins at low prices, warning that a second opportunity would only be available at higher amounts. Those interested in the offer are alleged to have signed up through an interna spreadsheet.
FTX’s collapse kicked off on Nov. 2, after reports of a leaked balance sheet from Alameda suggested the company held a significant amount of FTT (FTT), the native token of FTX, among other coins facing liquidity issues. As a large trading firm holding such a large amount of one asset, Alameda’s relationship with FTX raised questions in the crypto community, and ultimately led to a bank run on the exchange.
This article first appeared at Cointelegraph.com News
