Waves Founder Sasha Ivanov Accused of Extortion by FTX

Bankrupt cryptocurrency exchange FTX has accused Aleksandr "Sasha" Ivanov, the founder of Waves blockchain, of blackmail, fraud, and failing to return $90 million in cryptocurrencies as part of the exchange's bankruptcy proceedings.

The complaint, filed on November 10, alleged that Ivanov fraudulently siphoned approximately $530 million from the Waves Vires Finance lending protocol, 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 in Vires to be frozen," the complaint stated.

The Alleged Fraud Scheme

Ivanov's scheme, which allegedly took place between January and March 2022, involved:

1. Exploiting USDN, a stablecoin on the Waves blockchain
2. Using USDN as collateral to borrow more reputable stablecoins like USDC and USDT
3. Swapping USDC and USDT for WAVES tokens, driving up the asset's price
4. Using WAVES as leverage to create more USDN
5. Repeating the process until available USDC and USDT were exhausted

Consequences and Subsequent Developments

• The price of WAVES began to fall when users raised the alarm
• USDN depegged from its dollar target value
• Ivanov publicly blamed Alameda for manipulating the WAVES price
• Several agreements between Waves and Alameda were proposed over the following eight months
• After FTX and Alameda's bankruptcy, liquidators attempted to recover the $90 million
• Ivanov stopped responding after an initial call in January 2023

Recent Developments

• In April 2023, Ivanov threatened investors who had lost money in the Vires Finance debacle
• In May, Ivanov reported that Waves Labs suffered "financial damages" in a six-month hack
• In June, Ivanov dissolved Numeris, the legal entity operating Vires
• In November, he also dissolved DLTech, the legal entity operating Waves
• USDN, the fictitious dollar-backed stablecoin, currently trades around $0.01

Wider Context

This action comes amid a series of recovery claims by FTX targeting, among others, a major cryptocurrency exchange and Anthony Scaramucci, a cryptocurrency investor and former White House official.

In July, convicted cryptocurrency trader Avraham Eisenberg continued his attempt to recover $14 million, which he alleges Ivanov stole from him on the Waves blockchain in 2022.

The ongoing legal battles and accusations surrounding Waves and its founder highlight the complex and often contentious nature of the cryptocurrency ecosystem, emphasizing the need for robust regulatory frameworks and oversight in the rapidly evolving digital asset space.