The original article comes from Crypto Leaks, an investigation company that broke the scandals in the crypto industry. The first two cases they broke were about ICP being manipulated by capital and maliciously shorted. This article is about the fallen "White Horse Knight" SBF. Crypto Leaks investigated the market doubts and conditions at the time and believed that the ICP token was obviously manipulated before and after the listing. As the "spokesperson" of Solana, which was very popular in 2021, SBF has the motivation and ability to destroy the biggest competitor IC Network (but there is no substantial evidence, and there will be no evidence in the future). The release date is June 9, 2022, and FTX will explode in November 2022. The translator has slightly deleted and modified it.
Crypto Leaks provided an update on the case on April 7, 2023:
When we published this case analysis, it was the first in the industry to raise questions about Sam Bankman-Fried (SBF), including:
1. The improper bundling of his hedge fund and market maker, Alameda Research, with his cryptocurrency exchange, FTX.
2. He himself may be involved in criminal acts to manipulate the prices of popular cryptocurrencies, and their motives.
3. He was previously sued for price fixing and paid off the case.
4. He has trumpeted his charitable actions and intentions through efficient altruism, which may be a strategy to deflect critical scrutiny of his own criminal behavior.
5. He influenced the American media, politics, and regulatory system through lobbying.
Abstract:
• On May 10, 2021, when the Internet Computer (IC) mainnet went live, the spot price of its native token ICP was severely manipulated.
• Upon listing, the ICP token had a fully liquid market capitalization of $230 billion and its price almost immediately began to plummet, leading to a large number of attacks from the crypto community against the DFINITY Foundation and further declines in the price of the ICP token.
• SBF’s FTX exchange launched a perpetual futures instrument called ICP-PERP 4 days before the spot listing and manipulated the initial spot price of ICP by increasing the price 5x through huge trading volume.
• SBF’s manipulation of ICP prices began on FTX four hours before spot listing. The initial price of ICP matched the price of ICP-PERP.
• Only major hedge funds and market makers like Alameda Research, which is active on FTX, could pull off this kind of massive price manipulation. SBF also owns and controls Alameda Research.
• We believe that the main purpose of ICP price manipulation is to cause IC to crash when the mainnet is launched, thereby causing a scandal and driving people away from projects on the IC network to protect the crypto assets of unknown persons. Because the advanced technology behind the IC network may undermine the status quo of other blockchains and disrupt the current status quo of the crypto market.
• The IC Network’s underlying technology is advanced (and well known before launch), and it can become a Web3 alternative for traditional IT businesses such as cloud services, making Web3 more powerful.
• The main vision of the Solana blockchain is that it wants to provide a state-of-the-art platform for Web3, and it can be said that it is facing the challenge of IC.
• We believe that SBF’s possible price manipulation of ICP is intended to defend the Solana blockchain and ecosystem, and we believe he owns a large amount of Solana assets, which is important to his net worth (when the ICP price was sniped, Solana’s native token SOL appreciated significantly, bringing SBF billions of dollars in capital gains).
• Note the vertical relationship between Alameda Research, FTX, and Solana, which would not be possible in traditional finance.
• Note SBF’s lobbying practices, which he used to gain support and endorsements from organizations like the New York Times, including his pledge of more than $1 billion in presidential campaign contributions to Biden.
The mystery of ICP price manipulation
The Internet Computer (IC) blockchain launched its Genesis Mainnet on May 10, 2021. The blockchain has been in development for many years and is led by a large and highly qualified team of stars (mostly cryptography, academic and leadership talents) from the Swiss non-profit DFINITY Foundation. They claim that IC's underlying technology enables it to play the role of a "global computer" that can fully host and run social media, large-scale games, and enterprise systems on the blockchain without the need for traditional centralized technologies, such as cloud computing services from big tech companies. After the mainnet was launched, the native token ICP was transferable on its network, and cryptocurrency exchanges around the world began to create spot markets for users to trade ICP.
At the time of the mainnet launch and ICP token listing, the price was above $450, giving the network a fully circulated market cap of $230 billion, which was undoubtedly very high. Subsequently, the price began to fall. Ultimately, this led to a series of attacks on the IC ecosystem by the crypto community, causing the price to spiral far below normal levels and causing great damage to ICP holders and the community built on the network.
Spot markets typically determine the price of a token through a price discovery process. However, it appears that the initial price of the ICP token when it is listed may not be set through a normal price discovery process. Just four days before the mainnet launch, the FTX cryptocurrency exchange launched ICP-PERP, a perpetual futures contract.
We analyzed how ICP-PERP was trading before and after the IC mainnet launch and found suspicious activity, with ICP-PERP rising sharply before spot listing, indicating that it was used to manipulate the initial price of spot ICP tokens. This manipulation occurred in the hours before and after the mainnet launch. Once the price manipulation activity stopped, the price of ICP began to fall back to natural market levels.
The rapid price drop significantly damaged the reputation of the IC ecosystem, and some in the crypto community began attacking the project, claiming that the price drop was caused by improper actions by the DFINITY Foundation and insiders (our investigations indicate that these attacks were carried out by parties that had invested in or shorted the project). These attacks caused the ICP price to drop further.
In the absence of clarity on whether ICP was subject to price manipulation, innocent people may be suspected. For example, Sam Bankman-Fried is a major supporter of the Solana blockchain ecosystem, which arguably saw its market cap rise by billions of dollars as a result of the ICP crash. At the same time, he is also the owner of the FTX exchange, which introduced ICP-PERP before the IC mainnet launch, clearly facilitating price manipulation, and the owner of Alameda Research, a massive crypto hedge fund and market maker combination that is fully capable of organizing and executing price manipulation attacks. Let me be clear here that, apart from creating the ICP-PERP tool on FTX, this does not indicate that SBF personally participated in price manipulation activities.
However, SBF and FTX currently hold logs of every ICP-PERP transaction that occurred during the suspected price manipulation, as well as corresponding user account information. We need them to share this information so that the culprits behind the price manipulation can be identified. This will enable the ICP holder community to seek redress and help prevent additional attacks from occurring. (Translator's Note: Please note that this article was written in June 2022, when FTX had not yet collapsed)
Reasons for price manipulation
Crypto investors should all understand that manipulating the price of ICP at the beginning of the mainnet launch will cause obvious and greatest damage to the IC ecosystem. Therefore, we believe that the ICP price is manipulated by those who want to destroy the IC ecosystem.
We do not believe that the purpose of listing ICP at a high price is to allow the DFINITY Foundation and insiders to sell at a higher price, as this usually makes them "poorer" (severely damaging their own reputation). We also do not believe that the purpose is to allow cryptocurrency traders to short ICP, because at the beginning of the issuance, due to the limited liquidity of ICP, it is impossible to borrow enough ICP to create a large short position, and it requires high risk (too much heat). We believe that the manipulation of ICP prices is to protect the status quo of the crypto market.
It’s easy to understand the threat that IC poses to the status quo of the crypto market. It was developed over several years by a large team at the DFINITY Foundation, including renowned engineers, computer scientists, and cryptographers, and its technical capabilities were (and still are) very strong. For example, IC allows for unlimited on-chain scaling, smart contracts that can handle HTTP requests and create interactive web experiences, transaction efficiency that is orders of magnitude higher than any other blockchain, smart contracts that can run in parallel, and more.
ICP’s “opening high” arguably gave some other blockchains free reign to capture the attention of token investors during the 2021 bull run. If the media and community focused not on the ICP price drop but on the capabilities and growing community of the IC network, it would likely have immediately disrupted the crypto market status quo. We believe that individual large investors in IC’s competitors are likely to receive billions of dollars in capital gains as a result of the IC ecosystem being attacked. This is the ultimate reason behind what we believe to be the price manipulation.
How is the ICP-PERP futures contract weaponized?
Four days before the IC mainnet launch, FTX exchange launched ICP-PERP, a perpetual futures contract. Initially, traders could bet on ICP spot prices at just $114.40 after the mainnet launch through ICP-PERP. The price grew slowly and naturally until the mainnet launch day. At 10am Pacific time on May 10, eight hours before the IC mainnet launch, its price had risen to $176.89. It can be said that at this point, everything looked normal.
Then at 11am, ICP-PERP trading volume suddenly exploded, increasing 30 to 40 times compared to the previous few days. In the 7 hours from 11am to 6pm when the mainnet was officially launched and ICP spot was listed, ICP-PERP trading volume reached an incredible $241 million. On average, more than $34.48 million worth of ICP-PERP was traded on FTX every hour. In the 7 hours before the mainnet was launched, the price of ICP-PERP reached $275.67, $344.21, $329.09, $388.16, $466.22, $432.89, and $358.34.
In order to increase the price of an asset on a trading market, manipulators often use a number of different techniques to create the illusion of demand. Sometimes, they engage in "wash trading," which means they try to sell an asset while appearing to be both the buyer and the seller, thereby increasing trading volume. They often use fake accounts to create the illusion that different parties are involved in buying and selling. In addition, market manipulators can also increase prices by purchasing large quantities of an asset within a limited time.
It can be said that a key signal of market manipulation activities is a sudden increase in trading volume. This makes ICP-PERP trading volume highly suspicious. From the figure below, we can clearly see that ICP-PERP trading volume suddenly surged after 11 am, and the price entered a nearly vertical rise state and reached a peak after the mainnet was launched. After that, the price suddenly plummeted and eventually fell for a long time. The data chart comes from the FTX exchange itself.
The mainnet launch took place at 6pm on May 10, 2021. Subsequently, popular cryptocurrency exchanges such as Coinbase and Binance took the lead in launching ICP spot markets, allowing the public to buy and sell spot ICP tokens.
The prices of ICP-PERP and ICP are correlated. If the price of ICP-PERP is higher than the price of ICP, financial traders can profit from the arbitrage difference through special hedging transactions, which will inevitably push up the price of ICP spot.
From 6 to 7 p.m., shortly after the mainnet went live, ICP-PERP trading volume increased wildly. In that one hour, ICP-PERP trading volume reached $127.206 million, more than 250 times higher than a few days ago. The price of ICP soared to a record high of $494.29. Since the mainnet was already live at this time, ICP-PERP had a real-time impact on the price of ICP tokens on the spot market. By setting the initial ICP price at this high level and maintaining it at this high level for a period of time afterwards, the manipulators convinced those who held ICP, and those who wished to purchase ICP, that this opening price was a fair market price.
However, unknown to the public, the price of ICP was already being affected by ICP-PERP on FTX before it was even listed on the spot market. The last high volume of ICP-PERP was at 5:00 AM on May 11, reaching $55.914 million. At this time, the price of ICP reached $476.75 on the spot market. At around 7:00 AM, the volume of ICP-PERP suddenly returned to normal, and the price of ICP fell.
Bitcoin plunge drives ICP price to continue falling
The rise and fall of most token prices are highly correlated with changes in the price of Bitcoin. In the 10 days after the IC mainnet was launched, the price of Bitcoin (BTC) fell sharply, falling by 34%. As can be seen from the price chart, this had a downward pull on the prices of most tokens, and obviously also affected the price of ICP. However, since the initial price of ICP was obviously pushed up 3 times through the manipulation of the ICP-PERP price, it would have fallen anyway, so the effect of the decline was amplified by the impact of the Bitcoin crash.
Therefore, the timing was lucky for the culprits behind the price manipulation, but unlucky for ICP holders. In the 10 days after the mainnet was launched, the price of ICP fell by 76%. This helped the culprits unlock a wave of attacks on the IC network by the rest of the crypto community, which ultimately caused the ICP price to sustain its own decline.
After price manipulation, attacks spread
The crypto industry has long been plagued by “pump and dump” phenomena. As a result, crypto industry participants, including investors, developers, and the media, have become accustomed to interpreting a sharp rise in token prices followed by a rapid collapse as clear evidence that insiders initially bid up prices and then sold off.
It is extremely damaging to generally attribute this explanation to a project’s token crash, as it implies that the project is actually a charade, and the technology involved may not be important, but it is clearly intended to empty investors’ pockets of “real money”. The attackers who manipulated the ICP price and tripled its initial price at the beginning of the mainnet launch are likely major crypto industry players who are fully aware that when the ICP price starts to fall, investor resentment will inevitably spread in the IC ecosystem, thereby diverting the IC network from damaging its market position.
The crypto industry contains many competing tribes that are motivated by tokens. Members of these tribes use social media to alternately promote (scam) the networks they invest in and attack competitors that threaten their networks. As part of their marketing activities, many of these tribes are guided and motivated by the organizations behind the blockchain networks.
As the tribes took action against the IC Network, they were joined by those who had lost money on ICP trades, convinced by the widely circulated narrative that the ICP price must have fallen due to a “pump and dump” by insiders.
Some amateur members of the "tribe" took the lead in launching rumor attacks against ICP. For example:
•#Rumor1: The DFINITY Foundation team is fake# A Reddit user posted a report claiming that the team displayed on the DFINITY Foundation website was fake. When DFINITY Foundation founder Dom noticed this, he responded by offering a reward to find the author of the report, and the report was subsequently deleted. This ridiculous and unfounded conspiracy theory continues to be spread to this day, showing how damaging such rumors can be.
•#Rumor2: Repeating false facts# Goebbels, the Nazi propaganda minister during World War II, once said, “Repeat a lie enough times and it becomes the truth.” The same strategy is used by people on social media. For example, Max Keiser claimed on his Twitter account to his 500,000 followers that DFINITY and ICP are “pump and dump” scams. As false facts proliferate, rumors become more convincing.
•#RumorThree: Fictional Victim Stories# A netizen claimed that he was a participant in the DFINITY Foundation’s 2018 pre-sale financing, and that the Foundation had exhausted him physically and mentally by “confiscating” his ICP tokens and selling them on the market for profit. Unfortunately, most crypto enthusiasts may not know that this round of pre-sale financing was aimed at professional investors and institutions, and that when they contributed, they had agreed that the ICP they purchased would be paid out in 12-month installments after the token issuance.
Soon, attacks from professional teams also appeared. For example:
1. Arkham Intelligence
On June 28, 2021, a "mysterious organization" called Arkham Intelligence emerged (the Arkham that was very popular not long ago), and the equally unknown founder and CEO Miguel Morel claimed to focus on crypto industry research. They released a report claiming to prove that the decline in ICP prices was because the project was a "pump and dump" scam, and they used a carefully produced video to promote the report. Miguel claimed that "I was not hired (paid) to publish this report, I made it for the crypto community", portraying himself as a "white knight" defending ICP holders. However, the video begins with a false chart showing that the ICP price has fallen from about $800, greatly exaggerating the extent of the price drop (some trading market price sources do show a price of $800, but $800 only existed for one second when the spot was first listed).
In the video, Miguel claims that the market cap of the IC network is "as large as financial companies such as PayPal, MasterCard or Bank of America". However, the high market cap does not mean that the price of ICP will fall, so he goes on to make the point that the price drop is due to insider selling, saying: "This does not seem to be a coincidence or accident, but rather the misconduct of some people closely associated with the ICP token, who sold billions of dollars of ICP, while smaller investors were kept in the dark and watched their investments shrink significantly." He will "provide ICP holders with the clear answers they deserve", once again portraying Arkham as a "white knight".
At the end of the video, Miguel Morel said: "We should question this, perhaps, one of the most extreme investor harm cases in the history of crypto markets and financial markets." However, the DFINITY Foundation did not sell any ICP tokens in the weeks after the mainnet was launched, and founder Dom only sold less than 5% of his tokens. From this point of view, Arkham's report looks like "professional defamation."
Crypto Leaks revealed that Arkham was paid to produce this report and the forces behind it based on the spy video of the informant. Interested readers can move to "Arkham Chapter".
2. The New York Times believes that Arkham's report is credible
The New York Times promoted the credibility of Arkham’s dubious report, referring to it as a credible source in an article published on the same day and in their DealBook newsletter, which appeared to be coordinated in advance. The New York Times repeatedly and falsely referred to the issuance of ICP tokens as an illegal ICO, creating the false impression that DFINITY was the lawbreaker. The New York Times has a distinguished history and reputation, and their efforts to give credibility to the Arkham report have caused tremendous damage to the global reputation of the IC Network. There is no doubt that their irresponsible actions have resulted in billions of additional dollars in devaluation of the ICP token market value, harming thousands of ICP holders.
3. Restarting ICP - A fake community uprising
A new project called ICP Reboot ("Restart ICP"), composed of anonymous people, suddenly appeared in July 2021, claiming that "ICP Reboot is a community-driven project aimed at correcting the mistakes made by the DFINITY Foundation. The new ICPR token is a fork of the project to establish democratic control over this new blockchain protocol." In other words, ICP Reboot claims that they will copy the underlying technology of the IC network and launch a new blockchain with a new native token called ICPR, which will be the IC network version 2.0. Although the team behind ICP Reboot claims to be able to copy the technology involved in the IC network, the talk of an impending fork has instilled fear in the ICP community and put more pressure on the IC network at a time when it has already been attacked.
4. Class action lawsuits emerge using the Arkham Report
In July and August 2021, two class-action lawsuits emerged in the United States, alleging that ICPs were illegal securities, that price declines were due to “insider selling,” and that insiders should compensate ICP traders who lost money. Both lawsuits cited the Arkham Report as evidence of insider misconduct.
The first lawsuit was filed by the San Diego, California-based law firm Scott & Scott, and the second lawsuit came from the controversial Miami-based law firm Roche Freedman. These two litigation events have caused significant additional reputational damage to DFINITY and the IC ecosystem.
Unfortunately, what others outside the United States may not know is that the U.S. legal system allows people to freely file lawsuits full of false and unproven allegations without the risk of defamation charges, as the content of the lawsuit itself is a form of protected free speech. In addition, plaintiffs can subject defendants to invasive and costly procedures such as discovery, which allows plaintiffs to obtain confidential information from defendants and disrupt defendants in many ways, even if the defendant is innocent. Even if the plaintiff loses the case, he or she does not have to pay the defendant's legal fees.
In contrast, in Europe, unsuccessful plaintiffs must pay all of the defendant’s legal fees, and making false allegations in litigation without sufficient evidence can result in jail time – which naturally misleads European investors into believing that class action filings against ICPs must have substantial evidence and substance.
The US legal system thus provides a perfect platform for defaming competitors. Both class actions should be viewed in this context.
In particular, the law firm of the second lawsuit, Roche Freedman, does not seem to have any moral code. The screenshot above is from the crypto news source Cointelegraph. They first published a paid article on the Cointelegraph website titled "DFINITY insiders are suspected of illegally selling ICP tokens and harming retail investors." Their move looks designed to cause damage to the IC ecosystem and put pressure on the DFINITY Foundation.
However, Roche Freedman appears to have exploited a legal loophole: they temporarily edited the article’s title to remove the word “allegedly” before indexing it into Google search. This allowed the completely unsubstantiated claim that “DFINITY insiders illegally sold ICP tokens and harmed retail investors” to be spread to millions of crypto enthusiasts. They even went so far as to weave damaging false information into the article, saying that a legal ruling had been made in their favor. Roche Freedman subsequently restored the title of their paid article, adding the word “allegedly” so that they would not be sued for defamation.
There are many more examples of media outlets spreading FUD and encouraging holders to sell. Articles that appear often highlight Arkham’s ICP Report, ICP Reboot, class action lawsuits, and “pump and dump” scams. All of these serve to give the public and institutional investors the false impression that DFINITY is a “don’t touch” scam.
Hidden conflicts of interest
The traditional financial system has evolved over hundreds of years. In the past, stock and commodity markets have been heavily manipulated. For these reasons, layers of legal protections have been built up over time that allow free markets to function properly and provide participants with a degree of protection from those who would unfairly cause them losses. The purpose of many regulations is to ensure that certain roles in a free market environment are performed by different parties that operate independently and without the ability to collude. To understand why this is important and what went wrong in the centralized markets of the crypto ecosystem, we can imagine a world in which traditional stock financial markets lack these protections.
First, let’s imagine a financial entrepreneur who owns a hedge fund that makes money by actively trading stocks like IBM and Microsoft, using clever strategies and automated systems to outperform retail amateur investors. This entrepreneur makes a lot of money and then diversifies into becoming a “market maker,” providing liquidity to stock markets (market makers add depth to the market, ensuring that traders can buy and sell reasonable amounts of an asset at prices close to the prevailing market price, which is essential for markets to function). Now there could be a potential conflict of interest if the hedge fund arm of the business that expands requires market makers to disrupt the market for stocks they are short, while enhancing the market for stocks they are long.
Imagine further that the hedge fund and the market maker have combined to make so much money that they decide to launch a new financial exchange for tech stocks, and they all work in the same office building. Now, the potential for conflict of interest has multiplied: the hedge fund and the market maker may now demand highly confidential market information from the exchange, including information about other traders in the market, such as what stop-loss orders they have placed, and how much leverage they have. In the absence of regulation, the potential for unfair profits from this entrepreneur's "business empire" is endless.
Now take it a step further and the combination of hedge funds, market makers and financial exchanges makes so much money for the entrepreneur that he decides to back a specific technology platform whose shares will be traded on the same exchange. (Just like the dot-com bubble and crypto markets, the marketing of “we are listed on xxx exchange” is far more important to the market value than the technology involved)
Imagine that this entrepreneur has accumulated a large stake in a technology platform through huge investments in the companies that develop the platform and in the ecosystem of other businesses that build on it. Imagine that his capital and control of the market causes the platform’s stock value to soar, providing returns that can be reinvested into the ecosystem, attracting new investors with the lure that they “can invest in the next Alphabet in this virtuous market.”
During this phase, already wealthy and powerful financial entrepreneurs will earn hundreds of billions of dollars.
SBF: You might as well just give me your ID card. (Translator's note)
But imagine that at this time, there is another new technology platform that has been developed for many years by a non-profit foundation with a huge R&D program, and its technology is very advanced and leading. Some people worry that the launch of the new platform will destroy the entrepreneur's platform because the new platform is the fastest, most scalable and efficient platform. In other words, the new platform has the ability to change the rules of the game.
Obviously, this is a reasonable concern, and with just a little push, the entrepreneur's "business empire" could cause trouble for the stock of the new platform. At the same time, convince more people to develop on his platform.
Who knows what entrepreneurs will do, but this is precisely why in markets involving securities and traditional commodities, regulations are designed to prevent such conflicts of interest from occurring, and the cryptocurrency market needs these regulations as well.
SBF’s “Business Empire”
It can be said that SBF’s “crypto business empire” is very likely to have potential conflicts of interest.
First, Sam founded Alameda Research, which became the largest hedge fund in the cryptocurrency industry, and then acted as a market maker, providing liquidity to the cryptocurrency market. Sam used the huge profits generated by Alameda Research's trading activities to launch the cryptocurrency exchange FTX, which launched countless innovative products and grew rapidly, bringing him a lot of additional profits and providing him with tremendous power over the cryptocurrency market.
Some anonymous netizens shared a scene of SBF in a meeting, where he asked Alameda Research a question while talking to FTX employees on Zoom. In traditional finance, teams and roles are strictly separated, and this co-location reflects the increasing possibility of serious conflicts of interest. Despite the risks, SBF then continued to expand his territory, playing a leading role in financing and promoting the Solana blockchain and ecosystem, and its native token SOL is widely traded on cryptocurrency exchanges around the world. He then began to use his social media accounts to widely promote Solana.
SBF’s efforts have attracted institutional investors who believe his financial strength will determine the future of “Web3 technology.” At its peak on November 6, 2021, the fully circulating market value of the Solana network’s SOL token reached $132 billion.
Due to potential conflicts of interest, SBF and FTX must clearly demonstrate their impartiality by sharing ICP-PERP transaction logs.
FTX later invested heavily in consumer-facing advertising, including a Super Bowl ad, and focused on sponsoring sporting events, stadiums, celebrities and personalities, including Tom Brady, Major League Baseball, the Mercedes Formula 1 team, the Washington Wizards, the Golden State Warriors and other NBA teams.
SBF has repeatedly claimed that one day he will give away 99% of the massive fortune he made in the crypto market, creating a halo effect that often deflects criticism.
If SBF really cared about kindness, he could have started with the simplest thing — helping us unravel the mystery of ICP token price manipulation by sharing FTX’s transaction logs.
SBF was accused of price manipulation
Taking on SBF is no easy feat. He has billions of dollars in cash and widespread influence, allowing him to fund unlimited legal actions and the ability to strike back at his accusers in a multitude of ways. Extensive laudatory coverage of SBF, such as a New York Times article that talks about his $21.2 billion fortune, his connections to celebrity supporters, his appearance at a special event with Tony Blair and Bill Clinton, and a $10 million political donation to a Democratic congressional candidate, sounds daunting!
SBF also pledged to donate $1 billion to Democratic causes to ensure they go on to win in the next presidential election, a promise that also won him many friends in high office.
However, allegations have also emerged about SBF. In recent months, many crypto enthusiasts have begun to accuse SBF and Alameda Research of price manipulation attacks and FUD propaganda against Waves, a blockchain project competing with Solana.
In addition, there have been many different allegations over the years. For example, it was claimed that in September 2019, Alameda Research conducted two market attacks on the global crypto market through the Binance exchange, but was blocked by the latter's anti-price manipulation system. Later, there was a related prosecution case, which was settled with a paid dismissal.
Since the ICP token manipulation case mainly involves an attack on the IC ecosystem and ICP holders, which was launched using ICP-PERP on FTX, we hope to get assistance from SBF and FTX to identify the mastermind behind it. However, overall, we do believe that countries should establish more supervision on today's crypto markets.
How big of a threat was the IC network to Solana at the time?
For SBF, everything is about Web3, and the future of Web3 must be Solana.
Web3 is the next phase of the internet that will involve widespread tokenization, providing people with direct ownership of assets (such as media content), as well as shared ownership of the online services they choose to use and direct control and governance of the platforms. For many in the crypto industry, the key next step is for systems and services, such as social media and gaming, to be reimagined and rebuilt entirely using decentralized technology.
In Web3, online services like social media will be placed under the full control of DAOs (decentralized autonomous organizations), controlled by holders of governance tokens (through voting on proposals or upgrades). In the future, governance tokens will be distributed as rewards and enable users to become partial owners of the services they use.
It can be said that the Web2 ecosystem will gradually be reshaped in the form of Web3. This presents one of the greatest opportunities in recent history for tech entrepreneurs, as it offers new ways to reimagine services in new and compelling ways — tokenization helps create powerful network effects that allow them to outperform existing centralized Web2 services over time, as well as create entirely new experiences.
Blockchains that play the role of “Web3 platform” will become very valuable, which is why SBF has made the capabilities that Solana can bring to Web3 the core of its promotion.
A blockchain capable of supporting Web3 must be exceptionally fast, efficient, and ultimately scalable to massive throughput, which SBF often claims is Solana’s unique selling point. For example, at a crypto conference hosted by Yahoo Finance and Decrypt in November 2021, SBF said:
“Solana is one of the few public blockchains that exists today that has a really credible roadmap and can handle millions of transactions per second, you know, for a fraction of a cent per transaction.”
It does not make sense to use traditional centralized IT technologies (such as cloud services, databases, and web servers) to build Web3 services because it cannot be placed under the control of a community DAO. In addition, it can also be hacked, damaged, and unlike blockchain, there is no single point of failure and the person or organization that manages it has full control.
SBF is well aware that Web3 blockchains will need to host mass-market social media services in the future. For example, at the Solana Summit in November 2021, SBF stated:
“I continue to believe that the future of social media will be built on the blockchain, solving many of the pain points of today’s social media.”
SBF clearly articulates that speed, efficiency, scalability, and the ability to host social media on the blockchain are at the core of Solana.
But ideals and reality are different. What is the actual situation like, and how does it compare to the IC Network? Will he and other Solana insiders see the IC Network as a competitive threat?
The gap between ideal and reality
At a high level, it’s easy to understand the threat that the Internet Computer poses to Solana. When we did a simple survey of crypto enthusiasts (both journalists and investors), everyone understood that when they heard a Web3 service or decentralized application was “built on Solana,” they actually understood that the Web3 service or decentralized application actually ran entirely on the Solana blockchain, and that Solana was an end-to-end Web3 decentralized technology platform:
But this carefully cultivated perception of users through marketing is very different from reality. Most of the Web3 services and decentralized applications “built on Solana” are actually built on centralized servers in enterprise cloud services (such as Amazon Web Services) or data centers, which run databases, while Solana is only used to support tokens and smaller transaction information:
You might expect developers to describe a project as “built on Solana” and in practice find problems when building with traditional IT. But they accept the status quo because they know nothing is different. They were brought directly into the Solana ecosystem from Web2 hype, PR, and marketing, which convinced them that they were doing the right thing. Most of them did not investigate other blockchain networks or understand the differences between Solana and other blockchains, but instead started development directly after receiving generous grants, and these projects will be continuously updated with subsequent grants, making them loyal and integral members fighting for Solana's success.
Solana insiders can’t afford to be complacent about this disconnect between ideals and reality. As the IC Network mainnet launch approaches, they must worry that the IC Network’s ability to host social media services on-chain (something they crave) will hinder their ascent in the crypto market cap rankings.
IC Network took the lead in realizing their ideals and reality
The vast majority of people investing in the Solana blockchain are unaware of the vast technological differences between blockchains. Most believe in the potential of blockchains and Web3 and support Solana based on the success and reputation of Sam Bankman-Fried and the comfort of other investors doing the same. Many will make the case that the technological differences between blockchains don’t matter in Web3, citing the classic example of how the VHS videotape format used by JVC beat out the technologically more advanced Betamax format used by Sony in the 1970s.
The theory is that the capital and influence of SBF and its network can easily beat superior technology in the short to medium term, while buying time for their own technology to catch up. For example, Kevin O'Leary said of Solana:
"Who's working on this? SBF and his team! Why don't you bet on this horse?"
However, comparing the differences between IC and Solana to differences in videotape formats is of limited significance.
Compared to Solana, IC has completely different kinds of technical capabilities that are arguably critical to enabling the Web3 revolution because they allow Web3 services to run 100% on-chain under the control of a community DAO. For example, a smart contract hosted on IC can process HTTP requests and provide an interactive web experience directly to users, without the need for cloud computing.
Even if we can compare technical capabilities, Solana’s statistics are terrible. For example, to store 1GB of data, Solana charges 3480 SOL per year in rent, which, assuming a price of 1 SOL token of $100, would be equivalent to $348,000 per year. In comparison, storing 1GB of data on IC has a stable cost of about $5 per year.
IC’s developer community has already begun to take advantage of this lower cost to build Web3 social media services that run 100% on the blockchain. For example, a Web3 chat called OpenChat, where users can chat with each other using a web browser, runs entirely on the IC blockchain. The service involves IC’s smart contracts, which are fast enough to handle instant messages and can also store messages. It can be said that IC’s performance is an example of what Solana wants to be. Despite the various attacks on the IC network, it has a large developer community that is said to be working on hundreds of Web3 projects.
Imagine what the current state of the IC network would be like without price manipulation?
Because Solana is unwaveringly committed to the Web3 race, there is no doubt that if the ICP price manipulation event had not occurred, the IC would have profoundly damaged its propaganda vision and market positioning.
Survey Summary
The previous sections clearly demonstrate that the IC poses a potentially devastating threat to Solana.
The conspiracy theory that the DFINITY Foundation team is fake sounds ridiculous. DFINITY has an extraordinary team of leading cryptographers, computer scientists, and engineers, many of whom have thousands of citations to their own papers. In contrast, Solana has not even publicly shared details of its technical team.
A simple investigation quickly reveals that IC’s technology is vastly superior to Solana’s, and its vision for Web3 is far more ambitious. Despite various attacks and a lack of significant funding, the growth of the developer ecosystem suggests that the IC network has real product-market fit.
Without the devastating blow of the market manipulation and subsequent price crash on May 10, 2021, IC would almost certainly have severely damaged Solana’s core claim to be “the future of Web3” during the 2021 bull run. Therefore, supporters of the Solana ecosystem benefited the most from the ICP market manipulation incident.
In this case investigation, we have only provided speculative evidence that SBF benefited from the attack through his assets in the Solana ecosystem. We have also speculated on motives and believe that he had the ability to execute. Of course, this does not mean that he actually executed the attack.
Translator's note: Crypto Leaks repeatedly requested SBF and FTX to share ICP-PERP transaction records in the article to facilitate subsequent investigations. However, with the fall of FTX and SBF, we in 2023 may no longer be able to wait.
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