US CFTC files a complaint against Alameda and FTX, outlining an 'unfair' trading advantage and gross misappropriation of user funds.
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.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.
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. 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.’Other exceptions were created that allowed Alameda to have ‘an unfair advantage’ when trading on FTX. This included faster trading execution times as well as an exemption from the exchange’s ‘distinctive auto-liquidation risk management process’.
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