FTX's Bankman-Fried to face market manipulation probe, Do Kwon chimes in
United States federal prosecutors have reportedly begun investigating whether the collapse of the Terra ecosystem was in fact triggered by market manipulation tactics by former FTX CEO Sam Bankman-Fried.
According to a Dec. 7 report from The New York Times (NYT), the prosecutors — as part of a broader inquiry into FTX’s own collapse — are investigating whether Bankman-Fried’s empire intentionally caused a flood of “sell” orders on Terra’s algorithmic stablecoin TerraClassicUSD, USTC (formerly UST).
The sudden increase in UST sell orders were said to make it difficult to match them with corresponding “buy” orders, which in turn forced more downward price pressure on UST, causing it to depeg from its intended 1:1 ratio with the U.S. Dollar.
The events also led to the fall of Terra’s native token, Terra Classic, LUNC (formerly LUNA) as the two cryptocurrencies were designed to be linked.
But while no one has been able to precisely determine the root cause behind the collapse of LUNC and USTC in May, it is known that the majority of the USTC sell orders came from Bankman-Fried’s trading firm Alameda research, according to the NYT.
A person with knowledge on the matter also told NYT that Alameda Researched also placed a big bet on the price of LUNC falling.
Like with most comments Bankman-Fried has shared since FTX’s collapse, the former CEO claimed that he was “not aware of any market manipulation and certainly never intended to engage in market manipulation,” according to NYT.
“To the best of my knowledge, all transactions were for investment or for hedging,” he added.
Related: The nightmare continues for Sam Bankman-Fried and FTX — Law Decoded, Nov. 14-21
Responding to the recent report, Terraform Labs CEO Do Kwon shared his
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