The sudden collapse of the cryptocurrency exchange FTX has left the crypto world shaken. Now, US federal authorities have launched an investigation into the firm for potential securities violations.
The US regulators are looking into FTX collapse from an angle whether it allowed US customers to trade derivatives products without entities like FTX or FTX.US registering with federal regulators.
FTX crisis became a free fall even after it agreed to sell itself to rival Binance after experiencing a bank-run like exodus of customers over alleged capital erosion raising questions on FTX’s capital base.
Binance after saying yes to the takeover proposal reversed its stand on Wednesday. Thereafter, Bankman-Fried urged investors to support as FTX needed $8 billion to continue operations else it will move for bankruptcy protection.
The Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) are also examining any criminal activity or securities offenses in the FTX fiasco.
The probe into FTX by securities regulators will be examining whether the firm had used customers’ deposits to fund bets at Bankman-Fried’s hedge fund, Alameda Research.
In traditional markets, brokers will not touch client funds unlike company assets as violations will invite harsh punishment by regulators.
Some reports said that the Securities Commission of the Bahamas had frozen the assets of FTX Digital Markets, a subsidiary of FTX.
For the crypto investors, the events appeared paradoxical as FTX CEO and founder Sam Bankman-Fried was hailed as a savior who liberally helped many crypto currency companies under financial trouble.
