US federal prosecutors are investigating the possible connection between former FTX CEO Sam Bankman-Fried’s defunct crypto empire and the demise of stablecoin issuer Terra (LUNA). According to a new report from The New York Times, a large chunk of sell orders for stablecoin TerraUSD (UST) at the time of its collapse appear to have come from Bankman-Fried’s trading firm Alameda Research, which had also bet against MOND. According to the report, prosecutors are looking for evidence of market manipulation— where Bankman-Fried may have improperly influenced the prices of UST and LUNA.
In May, UST, which was supposed to maintain its peg to the US dollar through a mechanism that caused the supply of LUNA to increase each time its price fell, crashed, lowering the algorithmic stablecoin’s price to significantly under $1. Dragging Terra and LUNA with it. UST and LUNA never recovered. Several cryptocurrency firms, including digital asset lending platforms Voyager Digital and Celsius Network, and cryptocurrency hedge fund Three Arrows Capital (3AC), filed for bankruptcy after Terra’s dissolution in, further hitting the industry. FTX filed for bankruptcy last month after its native FTX token (FTT) assets plummeted, and the company was forced to halt customer withdrawals. Amid the bear market, Bankman-Fried is also accused of mismanaging client assets by funneling billions of dollars’ worth of funds from FTX user accounts to Alameda.
According to Bankman-Fried, he did not knowingly shuffle funds.
The report states that the Bankman-Fried investigation is still in its early stages as investigators plan to dig deeper to uncover what exactly happened to the embattled crypto exchange and how it connected to the crash of Terra.