Source: https://www.linkedin.com/feed/update/urn%3Ali%3Ashare%3A7006524956998078464
FTX Collapse Erased ~ $1 trillion From Crypto Market:https://lnkd.in/gvfpnP9p
#Market #Manipulation?
Federal prosecutors are investigating whether FTX’s founder, SBF, manipulated the market for two #cryptocurrencies #TerraUSD and #Luna this past spring, leading to their collapse and creating a #domino #effect that eventually caused the implosion of his own #cryptocurrency #exchange last month… It is #illegal for an individual to knowingly stage market activity designed to #move the #price of an asset up or down.
Federal prosecutors and the #SEC have been examining whether FTX broke the law by transferring its customer funds to Alameda. Last month, a run on deposits exposed an $8 billion hole in the exchange’s accounts, causing the company to collapse…
FTX is also under investigation for violating U.S. money-laundering laws that require money transfer businesses to know who their customers are and flag any potentially illegal activity to law enforcement authorities…
TerraUSD was a so-called #stablecoin, but unlike other stablecoins, its #value wasn’t backed directly by the U.S. #dollar. Rather, it maintained its value from a second coin called #Luna through a complex set of #algorithms. Traders within the #digital #ecosystem could #mint these #coins, the prices of which would fluctuate based on how many were in circulation. Anytime the #price of #TerraUSD fell, the #supply of #Luna would increase, as #traders created more Luna to try to capitalize on the difference.
In May, major #cryptocurrency #marketmakers — exchanges or individuals who arrange for buyers and sellers to be matched — noticed a flood of “sell” orders coming in for TerraUSD… The orders were in small denominations, but they were placed very quickly…
The sudden jump in #sell #orders for TerraUSD overwhelmed the system, making it hard to find matching “buy” orders for them. Under normal conditions, any sell orders that remained unfulfilled for too long would be matched with buy orders at a lower price. The longer the orders lingered without being matched, the more they forced down the price of TerraUSD and caused a corresponding drop in Luna prices because of the way the two coins were linked. The bulk of the sell orders for TerraUSD appeared to be coming from one place: SBF’s #cryptocurrency #trading firm, which also placed a #big #bet on the #price of #Luna falling…
Had the #trade gone as expected, the price declines in Luna could have yielded a fat profit. Instead, the bottom fell out of the entire TerraUSD-Luna ecosystem. The collapse caused more trouble in the cryptocurrency industry, sending several prominent companies into #bankruptcy and erasing about $1 trillion in #value from the #crypto #market.
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