US public prosecutors are allegedly examining if the fall of Terra is partially a result of market alteration strategies by the preceding FTX chair Sam Bankman-Fried.
As revealed by a December 7 statement from the New York Times, national prosecutors are in the process of ascertaining if Bankman-Fried’s exchange knowingly enabled an overflow of “sell” demand of Terra’s algorithm stable coins TerraClassicUSD, USTC previously tagged as UST.
The surge in the stablecoin “sell” demand was reported to complicate the matching process to purchase orders, resulting in a coerced plunge pressure in the value of UST and de-pegging it from its planned equivalent with the United States currency.
This occurrence also triggered the collapse of Terra’s Classic token LUNC, previously referred to as LUNA, and its original token as both were developed to relate.
Although there are no exact findings on what caused the fall of these tokens in May, it is verified that a significant portion of the “sell” demand had come from Bankman-Fried’s exchange company Alameda Research, as noted by the NYT.
Alameda Research reportedly made a significant bet on the crash of LUNC.
While Bankman-Fried refuted his involvement in any form of market alteration, Terraform Labs chair Do Kwon has had some thoughts to share.
According to the CEO, in a Thursday tweet, a significant part of currency deflation that the UST encountered in the past year February was kick-started by Bankman-Fried’s Alameda when the company traded about 500mm UST in less than one hour to clear out its curve pools amid the MIM challenges.