Federal US prosecutors are reportedly looking into the potential link between former FTX CEO Sam Bankman-Fried’s fallen crypto empire and the downfall of stablecoin issuer Terra (LUNA).
According to a new report by the New York Times, a large chunk of stablecoin TerraUSD’s (UST) sell orders at the time of its collapse appear to have come from Bankman-Fried’s trading firm Alameda Research, which had also placed a bet against LUNA.
The report says that the prosecutors are looking for potential evidence of market manipulation, where Bankman-Fried could have illicitly influenced the prices of UST and LUNA.
In May, UST, which was designed to keep its peg to the US dollar through a mechanism that caused the supply of LUNA to go up whenever its price dipped, collapsed and decreased the price of the algorithmic stablecoin to well below $1, dragging Terra and LUNA down with it.
UST and LUNA never recovered. Several crypto companies, including digital asset lending platforms Voyager Digital and Celsius Network and crypto hedge fund Three Arrows Capital (3AC) filed for bankruptcy following the disintegration of Terra, further pummeling the industry.
FTX itself filed for bankruptcy last month after its native asset FTX Token (FTT) crumbled and the firm was forced to halt customer withdrawals.
Amid the bear market, Bankman-Fried is also accused of mishandling customer assets by funneling billions of dollars worth of funds from FTX user accounts to Alameda. According to Bankman-Fried, he did not knowingly commingle any funds.
The report says the probe on Bankman-Fried is still in its early stages as investigators plan to dive deeper into finding out what exactly happened to the embattled crypto exchange platform and how it relates to the downfall of Terra.
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