FTX probe has feds wondering if SBF brought down Terra

US prosecutors in Manhattan are said to be probing Sam Bankman-Fried’s (SBF) involvement in the collapse of stablecoin terraUSD and its sister token, luna. According to sources close to the matter, SBF “steered the prices” to benefit his various crypto firms, including FTX and Alameda Research, the New York Times reports.

According to “two people with knowledge of the matter,” the ongoing investigation into the collapse of SBF’s own entities, FTX and Alameda, involves a closer look at how Terraform Labs’ (TFL) crypto tokens collapsed months prior.

Unconfirmed reports indicate that FTX shorted TFL’s luna token in order to get “a fat profit.” Simultaneously, a massive wave of sell orders came in for its stablecoin terraUSD — which is intrinsically linked to the price of luna. These orders were reportedly made by FTX.

Only, the orders were too much for the stablecoin to keep up with. It lost its peg. In an effort to bring it back up to $1.00, TFL flooded the market with luna tokens. However, the stablecoin kept falling, therefore pushing luna’s price down with it.

TerraUSD claims suggest SBF brought down his own house

If reports are substantiated, SBF attempted to de-peg the stablecoin in order to bring down the price of luna, therefore cashing out big on his short sell. Instead, the entire TFL ecosystem collapsed, bringing down other entities, some of which owed a lot of money to his companies.

SBF then went out on a crypto shopping spree, with his own Alameda Research buying up some of the firms going underwater. The move was heralded by the media as a charitable act — but many questioned SBF’s true motivations.

As major names in the crypto industry continued to fold like a house of cards, the inevitable consequences trickled down to FTX and Alameda. Out of cash, Alameda used customer funds from FTX to cover costs. FTX declared bankruptcy on November 11.