- FTX is attempting to claw back $90 million from Waves founder Sasha Ivanov.
- A complaint alleges Ivanov took the money as part of a broader $530 million fraud.
Bankrupt crypto exchange FTX has accused Waves blockchain founder Aleksandr “Sasha” Ivanov of blackmail, fraud, and failing to hand over $90 million in crypto as part of the exchange’s bankruptcy proceedings.
The complaint, filed on November 10, alleges that Ivanov fraudulently syphoned some $530 million from Waves lending protocol Vires Finance, including $90 million belonging to FTX-linked hedge fund Alameda Research.
“Ivanov sought to extort Alameda — demanding that it support Vires and Waves or he would cause Alameda’s assets on Vires to be frozen,” the complaint said.
Ivanov did not immediately respond to DL News’ request for comment.
The action comes amid a flurry of clawback claims from FTX targeting, among others, top crypto exchange Binance, and crypto investor and former White House official Anthony Scaramucci.
Whether FTX is successful in clawing back funds from Ivanov and others will impact how much the defunct exchange is able to return to the hundreds of thousands of users who lost funds on it during its 2022 bankruptcy.
FTX isn’t the only one attempting to recover funds from Ivanov.
In July, convicted crypto trader Avraham Eisenberg continued his attempt to claw back $14 million, which he alleges Ivanov stole from him on the Waves blockchain in 2022.
Eisenberg accused Ivanov of using the same scheme FTX described to steal some $530 million from users of Vires Finance.
The complaint references some specific details from DL News’ reporting on Ivanov’s alleged $530 million theft published in April 2023.
$530 million fraud
Ivanov’s alleged scheme took place between January and March 2022, according to the complaint.
It involved wallets linked to Ivanov exploiting USDN, a Waves blockchain stablecoin that worked similarly to the dollar-pegged TerraUSD, which imploded in May 2022 wiping out $40 billion.
Ivanov’s wallets used USDN as collateral to borrow other more reputable and liquid stablecoins that users had deposited to Vires Finance, such as Circle’s USDC and Tether’s USDT.
The wallets then sent USDC and USDT to Binance and exchanged them for WAVES tokens, pushing up the asset’s price. The WAVES was then leveraged to create more USDN, and the process was repeated until all available USDC and USDT had been borrowed.
When Waves users raised the alarm over the borrowing, the price of WAVES began to fall. This caused USDN to depeg from its targeted dollar value.
Ivanov had effectively swapped out Vires Finance users’ dollar-backed USDC and USDT for unbacked USDN, costing them millions of dollars.
In a X post on April 3, 2022, Ivanov publicly blamed everything on Alameda, accusing the hedge fund of manipulating the price of WAVES and organising a campaign of “FUD” — fear uncertainty, and doubt — to trigger panic selling.
Privately, however, Ivanov was in talks with Alameda behind the scenes.
‘Feels really gross’
On the same day, the complaint said, Waves offered Alameda a deal.
“We want to unwind the situation,” a senior Waves employee said, as cited in the complaint. “Let’s have FTX list USDN and we can sell you USDN,” the employee said. “You guys can return the WAVES borrowed and receive stables back from Vires.”
Over the next eight months, the two sides proposed various deals. But they remained at an impasse as Ivanov continued to push for Alameda to publicly announce an investment in Waves.
Ivanov believed that if FTX endorsed Waves and Vires Finance it would “restore confidence” in the Waves ecosystem after the $530 million theft, according to chat records in the FTX complaint.
One Alameda trader noted that the proposal “overall feels really gross lol, they stole our money and are holding it hostage in exchange for us doing some public stuff.”
Then-Alameda Research co-CEO Caroline Ellison said that she did not trust Waves to follow through with any of its promises. “Seems bad to publicly give in to blackmail,” she said.
After FTX and Alameda declared bankruptcy in November 2022, the exchange’s liquidators again tried to get Ivanov to return the $90 million.
After an initial call in January 2023, Ivanov stopped responding, according to the complaint.
A long history
In April 2023, Ivanov threatened investors who had lost money in the Vires Finance debacle.
In another episode in May, Ivanov told DL News that Waves Labs, one of the firms behind the blockchain, suffered “financial damage” in a six-month-long hack.
In June, Ivanov dissolved Numeris, the legal entity that operated Vires. Then in November, he also dissolved DLTech, the legal entity that operated Waves.
As for USDN, the dummy dollar stablecoin Vires Finance users were saddled with, it trades for around $0.01.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
