According to two sources with knowledge, federal prosecutors are looking into whether Sam Bankman-Fried (founder of FTX) manipulated the market for two cryptocurrencies in spring. This led to their collapse, creating a domino effect which eventually led to the implosion his own cryptocurrency exchange last month.
New York State prosecutors are looking into the possibility that Bankman Fried steered the currencies TerraUSD and Luna to his benefit, according to people.
This investigation is still in its early stages. It is unclear if Bankman-Fried has been charged with any wrongdoing, or when they started looking at TerraUSD and Luna trades. This is part of an expanding investigation into Bankman-Fried’s Bahamas-based cryptocurrency empire and possible misappropriation billions in customer funds.
Federal prosecutors and Securities and Exchange Commission are investigating whether FTX violated the law by transferring customer funds to Alameda. A run on deposits led to an $8 billion hole in the accounts of the exchange, which caused the company’s collapse. Bankman-Fried was removed as chief executive of FTX when the company filed bankruptcy proceedings on Nov. 11.
Three people familiar with the investigation stated that FTX is being investigated for violating U.S. money laundering laws. These laws require money transfer companies to identify their customers and flag any illegal activity to law enforcement authorities.
Bankman-Fried stated in a statement that he wasn’t aware of market manipulations and had never intended to engage.
He added that all transactions were either for investment or hedging.
Representatives of U.S. Attorney’s Office in Manhattan, Southern District of New York, declined to comment. Representatives from FTX didn’t immediately respond to inquiries for comment.
Bankman-Fried is facing a legal storm because of the increased attention given to market manipulation. It is illegal to stage market activity to change the price of assets.