As if the disgraced CEO of the now bankrupt didn’t have enough to deal with, now Sam Bankman-Fried is facing allegations that he might have had an influence in the collapse of the crypto Terra, earlier this year.
The investigation is looking at the breakdown of the Terra ecosystem, including its UST stablecoin and Luna (LUNA) token. According to a December 7 New York Times story, authorities are also looking to link SBF to the fall in order to determine if he was partially liable.
However, the investigation is still in its initial steps. According to a report by NYT, prosecutors must first determine if SBF had any involvement with the cryptocurrency, before accusing him of manipulating assets.
What Happened in Terra’s Collapse?
Around the start of the year, Terra was considered one of the brightest prospects in cryptocurrency. So much so that before the crash, Luna was among the top 10 cryptos by market capitalization.
The blockchain was a platform that powered a network of decentralized stablecoins. While its currency, LUNA, functioned as a decentralized reserve.
Prior to the LUNA catastrophe, around $2 billion in UST was unstaked from the Anchor Protocol (A crypto loan and borrowing system). No one knows exactly who did it, or why, but this caused a massive sell-off, causing the stablecoin to de-peg from its $1 value.
At the time, the company responsible for the blockchain “Terraform Labs” tried to stabilize the token by airdropping a huge amount of LUNA into the market. Needless to say, that price control attempt failed miserably.
Since then LUNA lost 99.9% of its value.
Did SBF Cause the Terra Downfall?
According to the NYT report, FTX was the source of the flood of UST sell orders.
“The bulk of the sell orders for TerraUSD appeared to be coming from one place: Sam Bankman-Fried’s cryptocurrency trading firm,” The article states. “Which also placed a big bet on the price of Luna falling, according to the person with knowledge of the market activity.”
If the allegations are true, the alleged failed attempt to bet on LUNA might have been the action that kick-started the series of events that eventually led to the bankruptcy of FTX.
