Federal prosecutors are investigating whether Sam Bankman Fried, founder of FTX, manipulated the markets for two cryptocurrencies last spring. The domino effect eventually led to the implosion at his own cryptocurrency exchange last year, according to two people who have knowledge of the matter.
New York U.S. prosecutors are investigating the possibility Bankman-Fried manipulated the prices of TerraUSD and Luna in order 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’s not clear if Bankman Fried has been accused of wrongdoing or when they began to look at TerraUSD/Luna trades. The investigation is part a larger inquiry into Bankman Fried’s Bahamas-based cryptocurrency business and the 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 that he never intended to engage.
“All transactions were, to the best of my knowledge,” he said.
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 for anyone to knowly stage market activity that moves the price or value of an asset.