SEC, DOJ and CFTC investigate crypto platform FTX

The fact that Binance backed out of FTX acquisition led to the increase of regulators' activity with regard to the exchange. The cryptocurrency exchange Binance said it is buying out the bankrupt platform, but within 24 hours the company announced that it would not proceed with the deal.

“As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations, we have decided that we will not pursue the potential acquisition of FTX.com.”

Binance explained this action by saying that “the issues are beyond our control or ability to help.”

Source: Twitter

The regulators will have to examine whether FTX properly managed customer assets, alongside its ties with CEO Sam Bankman-Fried’s other crypto projects, including Alameda Research.

Bloomberg’s anonymous sources said the SEC had already been investigating FTX's structure and activities as well as its FTX US arm for months. The Commission is confident that a number of the assets listed on the platform and its native token may meet the criteria for securities, which requires registration prior to sale. FTX may be accused in violation of the Securities Act if evidence is provided.

However, in the wake of recent events, the regulator collects information on any overlap between management and board structures, and the financial relationship between the two entities. Additionally, the agencies have also asked for the investor base and details on whether customer accounts were properly segregated. The SEC representatives do not comment on the existence or nonexistence of a possible investigation.

The CFTC also does not comment on the situation. But earlier, the regulator reminded of the importance of protecting investors and the risk of crypto platforms mishandling customer assets. If during the investigation some manipulations or fraudulent schemes will be discovered on the market, the Commission is authorized to proceed to enforcement measures against violators.

The Ministry of Justice will initiate criminal proceedings for offenses, including fraud.

The rapid collapse of FTX provoked a lot of discussions on social media from both fans and fierce crypto opponents. Elizabeth Warren, a member of the US Senate Banking Committee, who is known for her negative attitude towards the crypto industry, did not stand aside.

“The collapse of one of the largest crypto platforms shows how much of the industry appears to be smoke and mirrors. We need more aggressive enforcement and I'm going to keep pushing @SECGov to enforce the law to protect consumers and financial stability.”

Source: Twitter