Sam Bankman-Fried, the former CEO of cryptocurrency exchange FTX, has used his influence in the cryptocurrency industry to inflate the prices of certain coins through a strategy coordinated with FTX’s sister company, Alameda Research, according to a report in The New York Times. On January 18th.
As a way to keep FTX and the companies under its umbrella profitable, Bankman-Fried allegedly approached the developers behind the projects, insisting they release their tokens on the exchange platform. Then, as the report claimed, Alameda Research will buy a portion of these newly listed tokens to artificially boost their value.
Bankman-Fried reportedly relied on its popularity to publicize such projects and convince the crypto community to invest in so-called “Samcoins.” As a result, Alameda appeared to be in a stronger financial position than it actually was.
The paper compared the Bankman-Fried strategy to a Pump and dump Widely. In the stock market, this process refers to the increase in the value of stocks by investors with inside information in order to attract retail investors. Then, these investors sell their shares and the retail traders suffer losses.
charts Pump and dump Illegal and especially problematic when fraudsters use false or misleading statements to lure investors into micro and small business stocks.
For developers launching a new coin, the Bankman-Fried offering was an attractive option as they could take advantage of FTX’s appreciation to publicize their tokens and get more attention from potential investors. Among the alleged “Samcoins” were Serum, Maps, Oxygen, Bonfida, and Solana (SOL) itself.
A source interviewed by The New York Times also described how Bankman-Fried would offer a select group of investors a chance to buy these coins at low prices, warning that a second chance would only be available at higher values. Those interested in the show had registered through an online spreadsheet.
The collapse of FTX began on November 2nd after Alameda’s balance sheet was leaked which showed that the exchange-created FTX Token (FTT) and other liquidity-challenging coins made up the bulk of the fund’s reserves. A large trading company with such a large amount of assets and Alameda’s relationship with FTX raised questions in the crypto community and eventually led to the bank’s operation on the exchange.