By George Ward
At a time when the crypto industry is still grappling with the FTX insolvency issue, authorities are investigating whether the former CEO of FTX, Sam Bankman-Fried, played any role in the collapse of the Terra ecosystem.
The crypto market went downhill after the Terra UST stablecoin lost its dollar peg in May, which caused the entire Terra ecosystem’s collapse. Due to this, Terra’s parent company, Luna Foundation Guard (LFG), had to sell 80,000 BTC tokens.
This move triggered a tremendous market slump. According to a New York Times report, Sam Bankman-Fried is being questioned by US federal authorities about their roles in the collapse of the Terra system.
Sources familiar with the incident told the New York Times that the prosecutors in Manhattan are currently examining the likelihood that the former FTX boss exploited prices to generate gains for his firms.
However, it is still too early to say what will happen as the investigation has just begun. In addition, it is not yet sure whether prosecutors have evidence tying Bankman-Fried to any wrongdoing or whether they have started probing Terra’s policy agreements.
The report from the prosecutors read, “the case is a piece of a wider investigation into the fallout of Bankman-Fried’s Bahamas-based crypto exchange and the possibility of mismanagement of billions of customer deposits.”
Is FTX Responsible For The Terra LUNA Crash?
Interestingly, a report revealed that an upsurge in selling pressure from FTX caused Terra’s collapse. Bankman-Fried is reported to have sold large volumes of LUNA tokens to make huge profits.
Furthermore, if the transaction had been successful as he had planned, Terra’s price slump would have generated a massive profit. However, Bankman-Fried’s self-centeredness killed the Terra LUNA ecosystem.
More importantly, it plunged the entire crypto space into meltdown. As a result, the former FTX CEO is alleged to have been part of the reasons for the collapse of his two firms with his failed move in the LUNA trade.
Additionally, the after-effects of the Terra crash may have played a decisive role in the destruction of Bankman-Fried’s business empire. Interestingly, the Federal Prosecutor’s Office began investigating FTX before its insolvency.
As expected, the former FTX boss rejected all allegations of price manipulation pressed against him.
The study also adds further information to rumors about Bankman-Fried’s ties with Binance CEO Changpeng Zhao. The Binance boss is reported to have cautioned the FTX founder many times about his irresponsible behavior in his business, but Bankman-Fried paid no heed.
However, as things worsened, Zhao quickly alerted the public that FTX had serious liquidity crises. His infamous tweet is believed by many to be the last act that crippled the FTX.
Editorial Credit: FellowNeko / Shutterstock.com
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