In a series of tweets today, Terraform Labs founder Do Kwon accused Sam Bankman-Fried of purposefully dumping $1 billion TerraUSD (UST) and billions of Bitcoin to de-peg UST and weaken Luna Foundation Guard (LFG) reserves.
Notably, the tweets were sent in response to a New York Times article alleging that SBF is being investigated for market manipulation in connection with the Terra collapse.
“U.S. prosecutors in Manhattan are looking into whether Mr. Bankman-Fried manipulated the prices of two interconnected currencies, TerraUSD and Luna, to benefit entities he controlled, including FTX and Alameda Research, a hedge fund he co-founded and owned,” the New York Times reported, citing anonymous sources with knowledge of the situation.
As the New York Times pointed out, the investigation is still in its early stages, and investigators have not conclusively proven anything. Nonetheless, the report states that it is part of a larger investigation into the FTX collapse.
Kwon stated on Twitter today that he believes the report is correct because FTX or Alameda obtained a $1 billion UST loan from the now-bankrupt Genesis to attack the UST peg. Furthermore, Kwon claims that around the same time, Alameda borrowed billions of dollars in Bitcoin from Voyager to dump on the market and deplete LFG’s Bitcoin reserves.
Furthermore, the TFL founder claims that Alameda has previously targeted UST. For example, Kwon stated that in February 2021, UST would face a “currency contraction” due to Alameda’s rapid 500 million UST dump.
“What is done in the dark will come to light,” the TFL founder predicts.
It should be noted that SBF is not new to arbitrage trades against stablecoins. At the height of the FTX collapse, for example, Alameda opened massive shorts on Tether (USDT), temporarily de-pegging the stablecoin in what many believed was an attempt to recoup all of their losses in a single trade.
Crypto Twitter Reacts
Unsurprisingly, Kwon’s comments elicited a flurry of responses from members of the crypto community.
In response to the TFL founder today, Algod (@AlgodTrading), who predicted the UST de-peg and gained notoriety by betting against Do Kwon, claimed Luna was doomed regardless of an attack. “Whether it was an attack or not, Luna would have collapsed by now,” Algod tweeted.
While Gokhstein Media founder David Gokhstein stated that he was not a fan of Kwon, he did state that the sequence of events highlighted by Kwon was plausible. “I don’t want to believe Do Clown, but I see this happening,” tweeted Gokhstein.
Others noted that if Kwon’s claims are true, FTX will trigger a chain of events that eventually lead to its demise.