NEW YORK - United States federal prosecutors are investigating whether FTX founder Sam Bankman-Fried manipulated the market for two cryptocurrencies this past spring, leading to their collapse and creating a domino effect that eventually caused the implosion of his own cryptocurrency exchange in November, according to two people with knowledge of the matter.
Prosecutors in New York are examining the possibility that Mr Bankman-Fried steered the prices of two interlinked currencies, TerraUSD and Luna, to benefit the entities he controlled, including FTX and Alameda Research, a hedge fund he co-founded and owned, the people said.
The investigation is in its early stages, and it is not clear whether prosecutors have determined any wrongdoing by Mr Bankman-Fried, or when they began looking at the TerraUSD and Luna trades.
The matter is part of a broadening inquiry into the collapse of Mr Bankman-Fried’s Bahamas-based cryptocurrency empire, and the potential misappropriation of billions of dollars in customer funds.
Federal prosecutors and the Securities and Exchange Commission have been examining whether FTX broke the law by transferring its customer funds to Alameda. A run on deposits in November exposed an US$8 billion (S$10.9 billion) hole in the exchange’s accounts, causing the company to collapse. Mr Bankman-Fried stepped down as FTX’s chief executive when the company filed for bankruptcy on Nov 11.
FTX is also under investigation for violating US money-laundering laws that require money transfer businesses to know who their customers are and flag any potentially illegal activity to the law enforcement authorities, three people familiar with the investigation said.
In a statement, Mr Bankman-Fried said he was “not aware of any market manipulation and certainly never intended to engage in market manipulation”.
“To the best of my knowledge, all transactions were for investment or for hedging,” he added.
Representatives of the US Attorney’s Office for the Southern District of New York in Manhattan declined to comment. Representatives of FTX did not immediately respond to requests for comment.
The focus on possible market manipulation adds to the legal storm brewing around Mr Bankman-Fried. It is illegal for an individual to knowingly stage market activity designed to move the price of an asset up or down.
US senators Sherrod Brown and Patrick Toomey are seeking testimony from Mr Bankman-Fried at a hearing about FTX’s collapse on Dec 14, according to a letter issued on Wednesday.
Mr Brown said he and Mr Toomey are prepared to issue a subpoena if Mr Bankman-Fried does not choose to appear before the Committee on Banking, Housing, and Urban Affairs hearing.
“There are still significant unanswered questions about how client funds were misappropriated, how clients were blocked from withdrawing their own money, and how you orchestrated a cover-up,” Mr Brown’s letter to Mr Bankman-Fried said.
The House Financial Services Committee is holding its own hearing on FTX on Dec 13; chairman Maxine Waters said on Twitter that Mr Bankman-Fried has been asked to testify, and a subpoena is “definitely on the table”. NYTIMES , BLOOMBERG
