US federal prosecutors are reportedly investigating 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 from the New York Times, a large portion of the sell orders for the TerraUSD (UST) stablecoin at the time of its collapse appear to have come from Bankman-Fried’s trading company, Alameda Research, which had also bet against it. MOON.
The report says prosecutors are looking for potential evidence of market manipulation, where Bankman-Fried may have wrongfully influenced the prices of UST and LUNA.
In May, UST, which was designed to maintain its peg to the US dollar through a mechanism that caused the supply of LUNA to rise every time its price fell, crashed and reduced the price of the algorithmic stablecoin to well below of $1, dragging Terra and LUNA down with him.
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 following the breakup of Terra, further hurting the industry. .
FTX filed for bankruptcy last month after its native FTX Token (FTT) asset tanked and the firm was forced to halt customer withdrawals.
Amid the bear market, Bankman-Fried is also accused of mismanaging client assets by funneling billions of dollars in funds from FTX user accounts to Alameda. According to Bankman-Fried, he did not knowingly mix any funds.
The report says that the investigation into Bankman-Fried is still in its early stages, as investigators plan to dig deeper to find out what exactly happened to the embattled crypto exchange and how it relates to the downfall of Terra.
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