- U.S. prosecutors investigate potential SBF links to the collapse of the Terra ecosystem.
- Parallels arise between Do Kwon and Sam Bankman-Fried.
- Notable crypto personalities have called out the ex-FTX CEO.
Despite his best efforts to orchestrate an apology tour, pleading sympathy along the way, a new bombshell has been uncovered in the saga of Sam Bankman-Fried as the ex-FTX CEO comes under investigation for potential market manipulation involving Terra Luna.
Facing allegations of fraud, the ex-CEO of FTX opted to maintain a public profile. In the name of transparency and accountability, he gave a series of interviews on the collapse of FTX. Most of the time, he avoided answering hard questions. He insists that he did not knowingly take money from FTX depositors to fund risky trades of sister firm Alameda Research.
His efforts appeared to work, at least for a little while. He managed to persuade many in the corporate press. Many of them were recipients of FTX grants or benefited from FTX ad spending. He convinced the former FTX spokesperson Kevin O’Leary, and even the billionaire investor Bill Ackman believed him.
Bankman-Fried: a “Fraudster” and “Master Manipulator”
But not everyone is buying it. Binance CEO Changpeng “CZ” Zhao has long been skeptical of Bankman-Fried’s intentions and character. After the FTX collapse, CZ accused Bankman-Fried of being a “master manipulator.”
"SBF perpetuated a narrative painting me and other people as the “bad guys.” It was critical in maintaining the fantasy that he was a hero", CZ said. "SBF is one of the greatest fraudsters in history, he is also a master manipulator when it comes to media and key opinion leaders."
CZ could soon be vindicated in his assessment, as ‘master manipulator’ SBF is now under investigation for market manipulation. Moreover, his actions might have caused the fall of one of the first dominos in the recent crypto crash.
SBF could have even had a hand in another major crash. According to The New York Times, federal prosecutors are launching an investigation into him concerning the Terra-Luna collapse, which might have ultimately led to the bankruptcy of FTX.
Prosecutors are investigating whether SBF knowingly manipulated the price of the Terra (UST) algorithmic stablecoin and its counterpart, Luna.
Do Kwon – Terra Luna’s Own “Charismatic Manipulator”
Interestingly, there have been many parallels between the FTX debacle and the collapse of Terra Luna earlier this year. At that time, Terra Luna’s founder, Do Kwon, was being hailed as a crypto visionary who built the most “successful algorithmic stablecoin yet.”
Kwon made efforts to gain powerful allies. Potentially looking to court Bitcoin maximalists, the mogul’s non-profit Luna Foundation Guard amassed $3.5 billion in bitcoin reserves, with the investment implying that the foundation would dump bitcoin should TerraUSD come under attack.
The move made Luna Foundation Guard one of the biggest holders of bitcoin. It also pushed the price of BTC to $30,000. In May alone, the foundation bought $1.5 billion in bitcoin. Weeks later, the non-profit would dump $2.4 billion bitcoin in a failed attempt to defend the TerraUSD peg.
The crash revealed the real Do Kwon, as he lied about Terra’s reserves and made false promises to investors. Ultimately, the Terra whistleblower, who goes by FatManTerra on Twitter, even described him as a “sociopath with very little regard for people’s feelings” and a “charismatic manipulator.”
However, there were warning signs even before the crash. Do Kwon had publicly taunted his critics, at one point saying that he doesn’t “debate the poor.”
Terra Luna Market Manipulation
According to reports, Terra (UST) collapsed due to many sell orders coming in May. The pressure on Terra caused its counterpart, Luna, to lose value rapidly. The crash undermined market confidence in the ecosystem, causing Terra to lose its value.
Most of these orders appear to have come from Alameda Research. At the same time, Bankman-Fried’s trading firm allegedly shorted the price of Luna, which could have allowed Alameda to profit from the ultimate collapse of the Luna ecosystem.
The Terra-Luna crash echoes the more recent collapse of FTX. Depositors lost billions, and the turmoil prompted large-scale panic in the crypto markets. Following the crash, some $300 billion of value in crypto markets was wiped out.
JP Morgan to Elizabeth Holmes of Crypto – the Fall of Bankman-Fried
Notably, Terra-Luna founder Do Kwon is currently in flight from authorities after Interpol issued a warrant for his arrest. Some have speculated that Bankman-Fried may soon face the same fate. SBF currently resides in his $30 million mansion in the Bahamas, a country with an extradition treaty with the US.
If true, these reports paint a completely different picture of Sam Bankman-Fried and how he affected the crypto markets.
Rather than the “crypto JP Morgan”, a benevolent mogul that bails out struggling projects to prop up the markets, the investigation portrays Sam Bankman-Fried as a ruthless profiteer whose reckless actions might even have pushed the crypto markets to the brink of collapse.
On the Flipside
- Investigations into Sam Bankman-Fried’s activities are ongoing. As of yet, it is unclear to what extent the ex-FTX boss may have been involved.
Why You Should Care
Potential market manipulation ahead of the Terra-Luna collapse would demonstrate just how centralized the crypto space is. The revelation is even more proof that crypto needs more self-custody and decentralized protocols.