FTX’s Sam Bankman-Fried under Criminal Probe for Market Rig

FTX's Sam Bankman-Fried under Criminal Probe in the Collapse of TerraUSD is Being Investigated by NYC prosecutors

Did Sam Bankman-Fried play a role in the demise of the Luna stablecoin and the Terra blockchain? Prosecutors in Manhattan are looking into it. Federal prosecutors are looking into whether the founder of FTX manipulated the market price of the two doomed, interlinked currencies earlier this year, the Times reports. U.S. prosecutors in Manhattan are looking into the possibility that Mr. Bankman-Fried steered the prices of two interlinked currencies, TerraUSD and Luna, to benefit the entities he controlled, including FTX and Alameda Research. According to the journal, the demise of Terra and Luna ultimately contributed to the disastrous failure of FTX. Since FTX's demise in November, the exchange and its enigmatic founder have come under growing scrutiny from authorities and officials globally, who are also battling a "crypto epidemic" that is bringing down further bitcoin businesses?

The case of FTX is currently the subject of a legal dispute between the United States and the Bahamian government. The investigation into Bankman-potential Fried's connection to TerraLuna is still in its early stages. Bankman-Fried has been urged to appear at a House Financial Services Committee hearing on December 13, 2022. The following day, he was also called to appear before the Senate Banking Committee. It is not yet known if Bankman-Fried intends to go to either hearing.

According to a source familiar with the situation who spoke to Reuters, Ellison, the former CEO of trading firm Alameda Research, has retained Washington-based legal firm Wilmer Cutler Pickering Hale and Dorr to represent her. Requests for comment were not answered by Ellison or company representatives. The cryptocurrency exchange declared bankruptcy last month due to a liquidity problem that caused at least $1 billion in lost customer monies.

Bankman-Fried is receiving advice on the subject from Stanford Law School professor David Mills, according to Botnick. An inquiry for comment from Mills was not answered. Semafor has previously written about Mills' advice to Bankman-Fried. Ghislaine Maxwell was recently represented by Cohen, a former assistant US attorney for the Eastern District of New York, in her sex trafficking case. Martin Flumenbaum of the law firm Paul, Weiss, Rifkind, Wharton & Garrison had previously been engaged by Bankman-Fried, but the company announced last month that it was no longer representing him owing to conflicts.

Developed by Terraform Labs, TerraUSD (UST) is an algorithmic stablecoin. TerraUSD's peg to the dollar was lost in May after Terraform Labs flooded the market with Luna tokens to support the 1:1 UST-to-dollar peg. It was intended to be maintained by an arbitrage network that bought and sold Terra's cryptocurrency, LUNA. The price of the Luna token was drastically reduced to fractions of a cent the following week as the once-dominant stablecoin continued to deviate from its peg as a result of a flood of sell orders for TerraUSD, which an unidentified source said originated from FTX. In an apparent effort to make "a huge profit," FTX had shorted the price of Luna at the same time. Instead, the entire TerraUSD-Luna ecology collapsed.