Key Takeaways
- SEC, CFTC, and DOJ are looking into whether FTX followed securities laws related to the segregation of customer assets and trading against customers.
- SEC which has been probing FTX for months, is focused on the company’s U.S. subsidiary, FTX.US
The U.S. Securities and Exchange Commission (SEC) and Department of Justice are probing crypto exchange FTX amid a liquidity crunch. The regulatory watchdogs are looking into whether FTX followed securities laws related to the segregation of customer assets and trading against customers.
The Commodity Futures Trading Commission (CFTC), which is also probing FTX, is looking into how the crypto trading platform has managed its customers’ money and are trying to get a clear understanding of FTX and FTX US’s organizational structures, Last month, Texas regulators also started investigating FTX, its FTX US division, and founder and CEO Sam Bankman-Fried over alleged securities violations.
SEC which has been probing FTX for months, is focused on the company’s U.S. subsidiary, FTX.US. According to the source, SEC believes some of FTX’s assets, as well as FTX’s lending product, might constitute securities that, under U.S. law, should have been registered with the SEC before being sold.
If FTX didn’t register with the SEC, it indicates that the firm’s handling of customer assets might have violated laws governing U.S. exchanges. SEC has sought information about ties between FTX’s crypto exchange and its founder Sam Bankman-Fried’s trading firm, Alameda Research, as part of the ongoing probe. According to reports, SEC officials have contacted company lawyers to request more documents on the relationship between FTX.US and the parent company.
The Securities and Exchange Commission officials have long vowed to continue investigating and pursuing wrongdoing in the crypto assets space despite numerous complaints on the level of scrutiny on the crypto sector. SEC Chair Gary Gensler has previously repeatedly stated that crypto trading platforms such as FTX register with his agency and follow the same regulations that apply to traditional stock exchanges.
Earlier in May SEC nearly doubled the size of its enforcement unit that focuses on crypto assets and cyber threats. SEC’s investigation into FTX comes amid its token FTT falling over 58% in the past 24 hours to stand at $2.28 following news that Binance is backing out from the planned acquisition deal.
