The crypto-verse encountered the downfall of two major projects this year. While the community was just recovering from the infamous collapse of Terra, it was soon hit with the descent of the FTX empire. Manhattan prosecutors believe that there might be a connection between the two.
Federal prosecutors are reportedly investigating to see if FTX founder Sam Bankman-Fried was involved in the collapse of TerraUSD and Luna. According to a recent report by New York Times, these prosecutors believe that SBF could have manipulated the price of the aforementioned assets. He would have done this in order to bring profits to the entities he owned.
Back in May 2022, Terra’s stablecoin UST lost its $1 peg causing immense chaos in the market. The asset failed to regain its peg back and was trading for $0.02074, at press time.
It should be noted that the investigation launched by NYC prosecutors is in its early stages. Therefore, the FTX’s former CEO’s connection with the Terra ordeal remains uncertain. The report further read,
“The matter is part of a broadening inquiry into the collapse of Mr. Bankman-Fried’s Bahamas-based cryptocurrency empire, and the potential misappropriation of billions of dollars in customer funds.”
But why is SBF being investigated over the collapse of Terra?
As per New York Times, the downfall of TerraUSD was prompted by an increased number of sell orders. A source told Times that these sell orders came from FTX. In an apparent effort to make “a fat profit,” FTX had also shorted the price of Luna around the same time. However, the “bottom fell out of the entire TerraUSD-Luna ecosystem.”
Additionally, it should be noted that FTX was investigated several months before its recent collapse. This was done to determine if there may have been a breach of any laws related to money laundering. But, SBF went on to deny all these accusations by saying,
“[I was] not aware of any market manipulation and certainly never intended to engage in market manipulation. To the best of my knowledge, all transactions were for investment or for hedging,”