According to two people familiar with the matter, federal prosecutors are investigating whether Sam Bankman Fried, founder of FTX, manipulated the markets for two cryptocurrencies last spring. This caused their collapse and created a domino effect that ultimately led to the implosion at his own cryptocurrency exchange last year.

New York U.S. prosecutors are investigating the possibility Bankman-Fried steered prices of TerraUSD and Luna interlinked currencies to benefit entities he controlled including FTX, Alameda Research and a hedge fund he cofounded and owned, people claimed.

The investigation is still in the early stages. It isn’t clear if Bankman Fried has been accused of wrongdoing or when they began to look at TerraUSD/Luna trades. This matter is part a wider inquiry into Bankman Fried’s Bahamas-based cryptocurrency business and possible misappropriation of customer funds in the billions.

Federal prosecutors and Securities and Exchange Commission were investigating whether FTX breached the law when it transferred customer funds to Alameda. The collapse of the company was caused by a $8 billion hole found in its accounts due to a run-on deposits. Bankman-Fried was appointed FTX’s chief Executive when the company filed for bankruptcy.

Three people familiar to the investigation indicated that FTX is also being investigated for violating U.S. Money-Laundering laws. These laws require money transfer businesses in America to identify their customers and report any potential illegal activity to law enforcement agencies.

Bankman-Fried released a statement saying that he didn’t know of any market manipulation, and certainly not intended to engage in such manipulation.

He said that transactions were made for investment and hedging.

Representatives of U.S. Attorney’s Office Southern District of New York declined to comment. Representatives of FTX declined to comment on requests for information.

Bankman-Fried’s legal troubles are heightened by the focus on market manipulation. It is illegal to knowly stage market activity that moves the price of an asset upward or downward.

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