SBF Arrested And Tron Stablecoin Loses Peg To Dollar

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Last Updated on 6 November 2023 by CryptoTips.eu

Breaking news from the Bahamas overnight as FTX founder and crypto savant Sam Bankman-Fried was arrested by authorities there. Sam is scheduled to appear in a magistrates court in the Caribbean country’s capital, Nassau, later today.

Crypto Twitter applauded the decision while some said: finally. Meanwhile another algorithmic stablecoin, this time the one created by Tron founder Justin Sun, is losing it’s peg to the dollar.

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SBF arrest

Sam Bankman-Fried, who was supposed to testify before the US congress later this week about his bankrupt FTX platform, has been arrested overnight in the Bahamas, which has an extradition treaty with the US. As this site has stated multiple times, if you cause Silicon Valley billionaires to lose hundreds of millions of dollars, you can be sure that arrest is coming one way or another.

This is now the case and the reactions on crypto twitter were mostly those of: finally he’s been arrested. Last week there was great consternation when Bankman-Fried was given a chance to redeem himself and gave multiple media interviews in which he claimed that he just made a mistake.

Algorithmic stablecoin

Justin Sun, who founded the Tron blockchain and is on the board of many other crypto companies, is scrambling to pump funds into his algorithmic decentralized stablecoin USDD after it (briefly) lost its peg to the dollar. Tron’s stablecoin is modeled after Terra’s now-defunct UST and is seeing a broad loss of investor funds in digital assets.

You may recall that earlier this year the loss of the Terra stablecoin was a cause for Luna’s crash. As it was an algorithmic stablecoin, meaning it does not necessarily hold the same amount in reserves as needed but it is backed by another digital fund (aka a crypto asset whose value is supported by another crypto asset, designed to maintain a stable price).

However, given that several of the current crypto funds have seen huge withdrawals in the past days and weeks, USDD, the Tron network’s algorithmic stablecoin, has now also lost its peg (considered whenever a stablecoin loses 3% versus the value of the dollar) and is dropping fast.

Other leading stablecoins like the best known one, Tether wobbled a bit following the FTX collapse last month, but as they are backed by invested assets, they quickly regained their peg.

Steady

Trying to soothe the market’s nerves, Tron founder Justin Sun announced that he is deploying more capital to defend the USDD peg while at the same time stressing that the algorithmic stablecoin has a collateral ratio of 200%.

Problem for Sun was that he used the exact same wording that Terra founder Do Kwon used earlier this year (steady lads), just before their stablecoin also lost its dollar peg. And those of us who’ve been watching crypto all year still remember how that turned out.

Jeroen Kok

Jeroen is one of the lead copywriters on Cryptotips.eu and discusses all recent events in the crypto market. This includes news updates, but also price analyzes and more. He developed his passion for cryptocurrency during the bull run in 2017. He has learned a lot since then. The combination of cryptocurrency and creative writing is perfect for Jeroen and an excellent way to share his knowledge with a wide audience. Find me on LinkedIn / [email protected]
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