Report: FTX Founder Facing Market Manipulation Inquiry

Facts

• Federal prosecutors in New York are probing FTX founder Sam Bankman-Fried over potential market manipulation leading to the collapse of Terraform Lab's cryptocurrencies, TerraUSD and Luna, to benefit FTX and its hedge fund Alameda Research.¹
• TerraUSD was supposedly a so-called 'stablecoin,' but unlike other stablecoins, it wasn't backed by the US dollar. Instead, its value came from the Luna coin through a complex set of algorithms.; whenever TerraUSD's price fell, traders would create more Lunas to match the difference.²
• In May, traders and exchanges saw a sudden increase in 'sell' orders for TerraUSD which, under normal circumstances, would've been met with matching 'buy' orders of Luna. However, the overwhelming shift led to an abnormal drop in value for both coins.²
• The investigation is in its preliminary stages, and prosecutors have yet to provide a timeline for the probe or announce any misconduct by Bankman-Fried. Prosecutors are reportedly seeking information from investors and potential investors in FTX.³
• This comes as FTX and its founder face multiple other investigations into the company's collapse last month. Extraditing Bankman Fried from the Bahamas to the US would require cooperation between the two nations.⁴
• The US House Finance Services Committee is also looking into the FTX crash, with committee chair Rep. Maxine Waters (D-Calif.) having faced scrutiny for allegedly initially suggesting she wouldn't subpoena Bankman-Fried. She later stated: 'A subpoena is definitely on the table. Stay tuned.”⁵

Sources: ¹Finews, ²New York Times, ³Reuters, ⁴Business Insider and ⁵Daily Mail.

Narratives

• Republican narrative, as provided by New York Post. While authorities are looking into Sam Bankman-Fried and his years-long Ponzi scheme, you shouldn't hold your breath waiting for an indictment. The crypto king dubbed 'SBF' has gotten away with his crimes for so long because he's been a top Democrat donor. This is why he's received praise from the media and cautious treatment by the government even after his so-called 'company' collapsed and millions lost their savings.
• Democratic narrative, as provided by Intelligencer. While some have jumped the gun and compared Bankman-Fried to Bernie Madoff, this case is actually very different. Madoff immediately confessed to all of his crimes, and the Feds were also able to compile concrete evidence against him. Neither of these has occurred in the case of FTX and Bankman-Fried. Congress and the Dept. of Justice are looking into the issue, but it will take some time to build a case against the crypto CEO.