Sources: US prosecutors are investigating whether Sam Bankman-Fried manipulated TerraUSD and LUNA markets, leading to the cryptocurrencies' collapse in May 2022

Federal prosecutors are investigating whether Sam Bankman-Fried and his hedge fund orchestrated trades in a way that led to the collapse of two cryptocurrencies in May.

New York Times 2022-12-08

Context & Ripple Effects

Before this inquiry, the SEC was already examining how TerraUSD was marketed before its collapse. The reported prosecutorial focus adds a trading-conduct question involving Sam Bankman-Fried and his hedge fund to scrutiny that had centered on the stablecoin itself.

The investigation also sits alongside the DOJ's separate reported examination of cash flows around FTX's bankruptcy filing, tying the Terra episode to the widening legal exposure around Bankman-Fried.

First-order effects

Sam Bankman-Fried and his hedge fund face prosecutorial scrutiny over their trading during the TerraUSD and LUNA collapse, rather than only the later FTX-related allegations.
The inquiry puts the May collapse's market activity under a potential manipulation lens while the SEC's TerraUSD marketing review remains a separate regulatory track.

Second-order effects

Parallel DOJ and SEC scrutiny increases pressure on Terraform Labs and Do Kwon to distinguish alleged defects in TerraUSD's marketing from any outside trading that may have intensified the collapse.
Crypto trading firms handling thinly supported assets face a sharper enforcement risk: trading records can become central evidence when a token failure coincides with large market moves.

Third-order effects

If prosecutors substantiate manipulation, stablecoin failures will be assessed not only as product-design or disclosure failures but also as potential market-conduct cases involving major trading firms.
The combined investigations reinforce a crypto legitimacy gap in which enforcement increasingly tests whether exchange and hedge-fund practices can withstand the standards applied to financial markets.

The trend: Crypto enforcement is broadening from token issuance and promotion toward the trading behavior surrounding major market failures.

Discussion

@fatmanterra Fat Man on x
🧵 New blockchain data reveals the root cause of the May UST depeg. In the 3 weeks leading up to the depeg, one entity dumped over $450m of UST on the open market. 4 days after their last sale, UST started collapsing. That entity? None other than Terraform Labs. Details inside. ht…
@stablekwon @stablekwon on x
I think the time has come for @GenesisTrading to reveal if they provided the $1B UST shortly before the crash to SBF or Alameda - the purchase from LFG was represented as stemming from “interest to participate in the Terra Defi ecosystem” - not to provide ammo for a peg attack
@stablekwon @stablekwon on x
What's done in darkness will come to light
@mayazi Maya Parody on x
There's this new school of thought that think crypto has a vested interest in portraying SBF as the Mai nefarious villain in this bubble, that's just not true FTX's cancerous operation lifts the veil of the mutated crypto regulatory reality that's been morphed by regulations.
@stablekwon @stablekwon on x
https://www.nytimes.com/...
@yaffebellany David Yaffe-Bellany on x
NEW: The Justice Department is investigating Sam Bankman-Fried for market manipulation — focused on whether trading by Sam Bankman-Fried's crypto hedge fund helped trigger the Luna collapse in May. w/ @FlitterOnFraud @MattGoldstein26 https://www.nytimes.com/...
@mayazi Maya Parody on x
Probably the only thing you can't blame on SBF is the Luna collapse. It was a time bomb token waiting to crumble & any trade on that bet is legit imo https://www.nytimes.com/...
@stablekwon @stablekwon on x
Another question: Alameda borrowed 9 figures in bitcoin from Voyager (public bankruptcy filings) on depeg dates, and asked other large firms to borrow more (10 figs) - what this was used for needs to become public knowledge (Short btc to handicap lfg reserves?)
@stablekwon @stablekwon on x
This is fairly public knowledge at this point, but the large currency contraction that UST went through in Feb 2021 was started by Alameda, when they sold 500mm UST in minutes to drain its curve pools during the MIM crisis
@carlquintanilla Carl Quintanilla on x
“.. prosecutors in Manhattan are examining the possibility that Mr. Bankman-Fried steered the prices of two interlinked currencies, TerraUSD and Luna, to benefit the entities he controlled ..” ⁦@FlitterOnFraud⁩ ⁦@nytimes⁩ #FTX https://www.nytimes.com/...
@fintechfrank Frank Chaparro on x
“US prosecutors in Manhattan are examining 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, a hedge fund he co-founded and owned, the people said”…
@joevezz Joe on x
If it turns out SBF is responsible for Terra/LUNA, which was the first 2022 crypto domino, it means you can potentially draw a straight line that he's responsible for 3AC, Celsius, Voyager, and obviously FTX. Largest wealth destruction per capita in history.
@miguelvias Miguel Vias on x
The plot thickens. Apparently Alameda may have been behind the Luna/UST crash FTX Founder Sam Bankman-Fried Is Said to Face Market Manipulation Inquiry https://www.nytimes.com/...
@hsakatrades @hsakatrades on x
“Federal prosecutors are investigating whether SBF and Alameda orchestrated the Luna/UST collapse” https://www.nytimes.com/... https://twitter.com/...
@flitteronfraud Emily Flitter on x
NEWS: Federal prosecutors in New York are investigating whether @SBF_FTX manipulated the market for TerraUSD and Luna, leading to the coins' collapse & touching off the crypto crisis — w/@yaffebellany & @MattGoldstein26 https://www.nytimes.com/...
@alex_valaitis Alex Valaitis on x
🚨 Feds officially investigating if @SBF_FTX was behind the collapse of $UST and $LUNA If this turns out to be true, that means he's played a part in literally ALL of the damaging events that happened in crypto this year I'm beyond disgusted at this point... https://twitter.com/..…
@hsakatrades @hsakatrades on x
Aaaa I'm accidentally manifestinggg https://twitter.com/...
@mmasnick Mike Masnick on x
Hey @popehat, can you explain for Elon and friends how long these investigations take? Because they all seem to keep insisting that SBF is getting away with murder (since he wasn't locked up immediately) because he donated to some Democratic candidates https://twitter.com/...
@fintechfrank Frank Chaparro on x
Straight to jail
@uriklarman @uriklarman on x
- guy rugs $450M in USD from terra weeks before collapse - *while shilling to put mor $ there since it's safu - points out SBF scams No thanks kettle https://twitter.com/...
@justinwolfers Justin Wolfers on x
There must be a German word for when you manipulate one cryptocurrency and accidentally cause a run on a linked stablecoin leading to mass withdrawals from your crypto exchange that you can't pay because you lent those funds to your own betting operation.https://www.nytimes.com/ …
@davidzmorris David Z. Morris on x
If it proves true that @SBF_FTX somehow illegally manipulated USDT, that's, like, a whole other crime on top of the absolutely insane accounting fraud https://twitter.com/...
@coryklippsten @coryklippsten on x
So weird. Turns out that once you start cashing out your ponzi, the ponzi collapses. #DontKwon https://twitter.com/...
@wallstreetbets @wallstreetbets on x
I've said on interviews & speaking opportunities this month that FTX, although spectacular, is not as interesting as Terra/Luna Until this. @SBF_FTX might've propagated UST/Luna crash, which in turn boomeranged to blow up FTX. Fascinating teaser by @FlitterOnFraud via @nytimes ht…
@trengriffin Tren Griffin on x
https://www.nytimes.com/... Place a bet on the price of Luna falling. Flood the market with sell orders. Instead a price decline, the bottom falls out of the entire TerraUSD-Luna ecosystem. https://twitter.com/...
@marionawfal Mario Nawfal on x
A month ago we had a whistleblower reveal live on stage that SBF & Alameda played a role in the collapse of Luna and 3AC Today federal prosecutors launch an investigation into the matter Let's see what happens at tomorrow's space as the revelations reach a whole new level https:/…
@coinbureau @coinbureau on x
Imagine Do & SBF on the same Interpol red list 🤯 https://twitter.com/...
@mslopatto Elizabeth Lopatto on x
my apologies to comedians but I'm afraid you're obsolete. finance has obviated the need for you. https://www.nytimes.com/...
@frxresearch @frxresearch on x
so sbf borrowed from whole world to hunt luna and crashed bitcoin but at the same time recklessly invested in illiquid startups all over the world and in the end got caught pants down with no money https://twitter.com/...
@addytheyoung Andrew on x
SBF is the prime example of wordcel triumph over shapecels. Can't even code, stuck in bronze tier league, loses billions trading sh*tcoins during the bull run, and yet still built the third largest crypto exchange in less than 3 years, while you're alone still writing solidity
@scottmelker @scottmelker on x
SBF is the black swan. https://twitter.com/...
@cryptogodjohn Johnny on x
SBF single handedly caused or was apart of every black swan event in crypto this year
@coffeebreak_yt @coffeebreak_yt on x
NEW VIDEO: I finally got SBF to admit to comingled funds on FTX. He's a fraud, and he KNEW. 👇 https://www.youtube.com/...
@repmaxinewaters Maxine Waters on x
Lies are circulating @CNBC that I am not willing to subpoena @SBF_FTX. He has been requested to testify at the December 13th hearing. A subpoena is definitely on the table. Stay tuned.
@eleanorterrett Eleanor Terrett on x
The @SenateBanking Committee has asked @SBF_FTX to give testimony next Wednesday following the @FSCDems hearing. @SenSherrodBrown and @SenToomey say they are prepared to issue a subpoena to compel SBF to testify. https://twitter.com/...
@schwartzbcnbc Brian Schwartz on x
Scoop: House Financial Services commitee chair Maxine Waters doesn't have current plans to subpoena ⁦@SBF_FTX⁩ to testify at the upcoming hearing on the crypto exchange's collapse. She informed members of this at a private meeting last night. https://www.cnbc.com/...
@tier10k @tier10k on x
House Financial Services Committee Chairwoman Maxine Waters informed a group of Democrats that she doesn't plan to subpoena former FTX CEO Sam Bankman-Fried. https://www.cnbc.com/...
@twobitidiot Ryan Selkis on x
Senator Warren doesn't want to investigate a single bank for its relationship to a fraudulent crypto exchange. No, she wants to shut down all banking access to honest crypto companies, too. That is her goal. Fortunately, people like her are only electable in Massachusetts. https:…
@ylanmui Ylan Q. Mui on x
Their letter to SBF minces no words: “I am prepared, along with Ranking Member Pat Toomey, to issue a subpoena to compel your testimony.” Deadline for response is Thursday at 5 pm. Hearing is Dec. 14 at 10 am. https://www.banking.senate.gov/ ... https://twitter.com/...
@autismcapital @autismcapital on x
“Those at the meeting say Waters said she wants committee staff try to convince Bankman-Fried to voluntarily testify, those with knowledge of the meeting said.” This is pretty egregious.
@johnedeaton1 John E Deaton on x
Oh Sammy Boy @SBF_FTX, you might want to bring your toothbrush 🪥 with you. Just in case. https://twitter.com/...
@andrewkerrnc Andrew Kerr on x
Well, SBF very publicly declined your request on Sunday. Your move, Maxine! https://twitter.com/...
@caspiancey Cas Piancey on x
.@RepMaxineWaters is hiding hundreds if not thousands of replies of people questioning why Congress didn't subpoena him and showing glowing pictures of her with SBF. https://twitter.com/...
@stonksbatman Bertman on x
He should already be subpoenaed. It shouldn't be an option left on the table. 🤦‍♂️ https://twitter.com/... https://twitter.com/...
@charliekirk11 Charlie Kirk on x
BREAKING: Chairwoman of the House Financial Services Committee, Democrat Maxine Waters, confirms she does not plan to subpoena Sam Bankman-Fried to testify on the collapse of FTX which cost depositors billions. https://twitter.com/...
@menofordermedia @menofordermedia on x
We're sure you'll get to the very bottom of it, Auntie Maxine... https://twitter.com/... https://twitter.com/...
@vitalikbuterin @vitalikbuterin on x
One thing I don't understand is why people assume big powerful actors are static and unaffected by public discourse. Like, I haven't seen any SBF take even mention the possibility that some NYT or gov person started off soft, but changed strategy after seeing public feedback.
@iamdcinvestor @iamdcinvestor on x
@RepMaxineWaters ... is there a reason you've given him the white glove treatment, lauding him for his willingness to speak to the public, politely asking for his presence, while you have metaphorically thrown the book at other tech executives in the past for lesser issues? a sub…
@zerohedge @zerohedge on x
While @RepMaxineWaters checks the inbound wire transfers, Senators Sherrod Brown and Pat Toomey told @SBF_FTX they will issue a subpoena to compel him to appear on Dec 14 if he does not volunteer by 5pm on Dec 8. https://twitter.com/...
@neerajka Neeraj K. Agrawal on x
“If you chose not to appear, I am prepared, along with Ranking Member Pat Toomey, to issue a subpoena to compel your testimony.” https://www.theblock.co/...
@comfortablysmug @comfortablysmug on x
SBF stole money and gave it to Dems because he thought they would protect him when the Ponzi fell apart Is he wrong? House republicans need to decide
@investmentshulk @investmentshulk on x
CYBERBULLYING WORKS. https://twitter.com/...
@ylanmui Ylan Q. Mui on x
.@SenSherrodBrown @SenToomey will “consider further action” if SBF doesn't agree to testify before their committee. https://twitter.com/...

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