FTX and Its Operations under Scrutiny by DOJ and SEC
Top US regulators i.e. Department of Justice (DOJ) and Securities & Exchange Commission (SEC) are currently investigating a collapsed crypto firm, FTX.
Both these key departments of the US are examining the circumstances surrounding the firm which has already sought bankruptcy.
The firm was founded by Sam Bankman-Fried who has founded several businesses across the US and Alameda Research too belonged to Bankman-Fried.
While noting several aspects leading to the collapse of FTX, DOJ and SEC both noted that FTX is undergoing massive liquidity chaos.
This fact was further confirmed by an FTX insider to Bloomberg who endorsed that the liquidity crisis will end FTX’s journey.
Apart from the liquidity crisis, there are other crises too which are emerging on a regular basis. For instance, an FTX insider revealed that $1 Billion belonging to customers was not accounted for in the latest accounts.
FTX Accused of Mismanaging Customers’ Funds
Reports suggest that now SEC along with CFTC are also looking at FTX’s affairs, particularly with regard to managing customers’ funds.
The rumor is that SEC’s investigation revealed that FTX was actively involved in mishandling and mismanaging the funds belonging to its customers. Consequently, SEC has accused FTX of mismanaging customers’ funds.
Initially, a probe was initiated by the SEC which was particularly against FTX US, a US subsidiary of FTX.com i.e. the parent company.
While enquiring about FTX US, numerous aspects were noted by SEC which led the SEC in expanding its investigation. Now FTX.com too is a subject of inquiry by SEC.
Several FTX’s Tokens Suspected Of Being ‘Securities’
It has been suggested by SEC that during its course of business FTX US was dealing with a number of crypto tokens that may be securities. However, the firm hasn’t got them registered as ‘securities’, noted SEC.
In case the inquiry reveals that the SEC’s assumption is right then FTX will be subjected to litigation will worsen the financial difficulties.
Under the US Law of Security, if an asset is a digital asset and cannot be classified as ‘security’ then SEC’s registration is not required. However, in case a digital asset is classified as ‘security’ then SEC’s permission is necessary.
SEC Registration Ensures Business Survival
SEC’s concerns were duly revealed by the regulator’s Chairman, Gary Gensler, when he was attending a conference on 9th November.
The Chairman was speaking on the crisis emanating from FTX’s collapse.
During his address, Gensler emphasized that the crypto industry is free from the oversight which is applicable to the traditional financial markets.
He insisted that securities laws provide complete protection and therefore crypto companies must also get themselves registered with SEC.
It was due to these accusations and concerns in response to Binance backing off from sealing an acquisition deal with FTX.