FTX and Alameda Research May Have Used Social Media Bots To Manipulate Crypto Market, Says New Study

New research finds that Twitter bot accounts may have lifted the prices of digital assets listed on embattled crypto exchange FTX and traded by its hedge fund arm, Alameda Research.

The study, conducted by the Network Contagion Research Institute (NCRI), examined more than three million tweets between January 1, 2019, to January 27, 2023, that mention 18 cryptocurrencies once publicly listed on the now-defunct FTX exchange.

The study highlights how FTX’s former head Sam Bankman-Fried was well aware of Twitter’s large influence on crypto prices.

“Bankman-Fried, at the height of FTX, once illuminated a disturbing trend within the crypto industry, where perceived value, often fueled by social media hype, would eclipse any intrinsic worth, leading to inflated market capitalizations.

He stated, ‘In the world that we’re in, if you do this, everyone’s gonna be like, Ooh, a box token. Maybe it’s cool. If you buy a box token,’ you know, that’s gonna appear on Twitter and it’ll have a $20 million market cap.’ Bankman-Fried’s explicit mention of Twitter suggests an acute awareness of its influence on the cryptocurrency market.”

The study questions whether FTX, which went bankrupt last November, engaged in a Twitter scheme to manipulate crypto markets, as NCRI researchers say they found that the bot-like tweets had an effect on token prices.

“It begs the question, did FTX or Alameda engage in coordinated inauthentic activity on social media to artificially inflate market values?

NCRI’s study suggests that the intensification of social media activity was not merely an organic outcome of the coins’ popularity, but potentially a strategic ploy to influence market sentiment. Contrary to conventional wisdom, NCRI’s findings show that it was not just price variations that significantly influenced tweet volumes, but that the reverse was true as well.”

NCRI researchers say that “inauthentic, bot-like comments” about the 18 tokens increased over time after FTX promoted the digital assets. The 18 cryptocurrencies include Render (RNDR), The Sandbox (SAND), Immutable (IMX) and Gala (GALA).

Says the study,

“It is notable that bot activity appears to rise beginning with official promotion by FTX. This suggests that FTX promotion may have proven catalytic for attracting inauthentic amplification. While listing on FTX attracted substantial increases in overall chatter for each coin, it is notable that the proportion of inauthenticity in this chatter significantly increased over time.”

Bankman-Fried faces a slew of charges related to the November collapse of FTX, including allegations that he defrauded customers and mishandled billions of dollars worth of their funds.

 

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