The US Commodity Futures Trading Commission asserts that Sam Bankman-trading Fried’s firm Alameda Research had a covert speed advantage when processing orders on his now-defunct FTX cryptocurrency exchange.
According to the CFTC, Alameda was able to bypass certain portions of the system and gain faster access. Even though institutional customers’ orders were still routed through the FTX system. Transaction orders were thus received several milliseconds quicker than those of other institutional clients.
Alameda allegedly had a distinct advantage in terms of trade speed. Because it was exempt from some automated verification processes. Basically, it checked to see if it had funds before completing a transaction.
Alameda avoided automated procedures
According to CFTC, these benefits, which were kept a secret, produced a “significant speed advantage.” The lawsuit claims that Alameda was able to avoid automated procedures like confirming that funds were available before executing a transaction because of the features of Alameda’s FTX account.
However, CFTC claimed that, if other clients placed multiple orders simultaneously, these checks occurred in sequential order, allowing each transaction to be confirmed as viable. This did not apply on the Alameda account. Speaking for Bankman-Fried, Mark Botnick declined to address the specific claims made by the CFTC regarding a speed advantage.
CFTC suing Bankman- Fried
In the crypto community, there had long been suspicions that she was receiving special treatment on FTX. In September, according to Bankman-Fried, Alameda sent orders and accessed customer data similarly to other users.
Bankman-Fried, FTX, and Alameda Research are being sued by the CFTC for breaking federal commodities laws. He was charged on Tuesday by the Securities and Exchange Commission with running a multi-year scheme to defraud investors. He was detained on Monday in the Bahamas and is also charged criminally in the US.
Also Read: SBF Wanted To Keep SEC Out Of Crypto Regulation: FTX Hearing
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