Public enemy number one of crypto, Sam Bankman-Fried (SBF), could be investigated for market manipulation. Do Kwon shared his thoughts on the situation and blamed Alameda for exacerbating the UST stablecoin crunch.
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Former FTX CEO Sam Bankman-Fried has become a target for federal prosecutors. They have launched an investigation into whether he manipulated the markets for two crypto assets earlier this year.
The collapse of the Terra (LUNA) ecosystem and its stablecoin UST is being investigated. Additionally, prosecutors are trying to link SBF to the collapse to determine if it was partially responsible, according to a Dec. 7 NYT report.
According to sources familiar with the matter, the investigation is still in the early stages. They have yet to determine if SBF had any role in it or any intention to manipulate the markets to benefit their own companies and tokens.
I’ve said on interviews & speaking opportunities this month that FTX, although spectacular, is not as interesting as Terra/LunaUntil this.@SBF_FTX might’ve propagated UST/Luna crash, which in turn boomeranged to blow up FTX.Fascinating teaser by @FlitterOnFraud via @nytimes pic.twitter.com/ZMhAHDcUvH
— WallStreetBΞts (@wallstreetbets) December 8, 2022
Was Sam Bankman-Fried involved in the collapse of Terra?
The Terra stablecoin depegged from the dollar in May. The firm behind it, Terraform Labs, flooded the market with LUNA tokens in an attempt to maintain parity. That failed, LUNA crashed, and UST fell further, sparking the first major crypto contagion of the year.
According to the report, a flood of UST sell orders originated from FTX. “The orders were in small denominations, but they were done very quickly,” he added.
The increase in TerraUSD sell orders overwhelmed the system, making it difficult to find the matching “buy” orders, forcing the UST price down. The LUNA token that collateralized the stablecoin would soon crash as well.
Most of the TerraUSD sell orders seemed to be coming from one place: Sam Bankman-Fried’s cryptocurrency trading firm, which also made a big bet on LUNA’s falling price.”
The LUNA price declines may have generated huge profits for those behind the push. However, the entire system crashed, wiping out as much as a trillion dollars from the crypto market and the crash that followed.
Furthermore, the fallout from that collapse ultimately spelled the end of the SBF crypto empire six months later.
No summons for SBF
In related news, House Financial Services Committee Chair Maxine Waters said she does not plan to subpoena Sam Bankman-Fried.
According to CNBC, Waters told Democrats that SBF would not be forced to appear at a hearing on December 13. He wants the committee staff to try to convince him to testify voluntarily. Earlier this week, SBF, who has come under fire for his recent interviews, said he would testify at the committee hearing on December 13.