While the complexity of the situation at FTX has so far allowed Sam Bankman-Fried to avoid any legal repercussions for his role in the platform's collapse, that time may soon be coming to an end. Currently, Bankman-Fried is facing investigations from a plethora of prosecutors and regulators, and the Senate has asked him to appear at a hearing to comment on FTX's crash.
Still, it's unclear whether or not any of these investigations will lead to criminal charges.
Bankman-Fried first came under fire when it was revealed that a significant portion of the $14.6 billion in assets at his investment firm, Alameda Research, were made up of FTX's tokens. Under the platform's terms and conditions, FTX had promised not to spend money users placed on the exchange.
As a result of the Alameda revelation, customers started to worry about FTX's ability to cover withdrawals. Bankman-Fried took to Twitter to reassure customers that the company had the solvency it needed to pay back investors, but at the time, the company reportedly held $900 million in liquid assets against $9 billion in liabilities.
The day after Bankman-Fried's tweet, the company announced that it would be signing an acquisition offer from Binance due to a "liquidity crunch". However, Binance soon pulled out of the deal when it discovered just how bad off FTX was.
Following the collapse, Bankman-Fried quickly came under investigation from the Justice Department and the Securities and Exchange Commission. So far, the thirty-year-old former-billionaire hasn't faced any charges as a result of these investigations, but the number of cases against him keeps growing.
More recently, Bankman-Fried has been implicated in broader market manipulation relating to the collapse of stablecoin TerraUSD and its linked coin Luna. Whenever TerraUSD lost value, the supply of Luna coins would increase to act as a stabling force on TerraUSD's price.
In May, Alameda flooded TerraUSD with sell orders, driving down the value of Luna. At the time, Alameda had made bets against Luna, meaning a drop in its value would bring in big profits. However, Alameda's hypothetical scheme failed when both coins quickly collapsed.
That collapse might actually have contributed to the eventual implosion of FTX and Alameda. When Alameda's bet against Luna fell through, it was left on the hook for billions of dollars in loans which it attempted to pay off with money from FTX's exchange. As the money was funneled out of the exchange to cover Aladema's debts, suspicion grew amongst FTX investors, and they soon rushed to withdraw their funds.
Manhattan prosecutors have announced that they are investigating Bankman-Fried's role in the TerraUSD Luna crash, but it's unclear whether or not the former-CEO will face charges.
