US regulators investigating FTX structure and client funds’ handling

    10 Nov 2022
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    US financial regulators are investigating whether embattled crypto exchange FTX properly handled customer funds and its relationship with other parts of the business empire of Sam Bankman-Fried, Bloomberg sources reported. The SEC also scrutinizes Binance’s move to buy FTX.

    The investigations by the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are connected to the latest FTX liquidity crisis that led to its planned acquisition by rival crypto exchange Binance, the sources said. Regulators are also looking into the platform’s relationship with its American subsidiary FTX US and Bankman-Fried’s trading house Alameda Research. The SEC’s inquiry began months ago as a probe into FTX US and its crypto-lending activities, said the sources, who would stay anonymous as the investigations haven’t been disclosed publicly.

    The sources told Bloomberg that the SEC and CFTC’s investigations are related to FTX’s liquidity crunch, which Binance CEO Changpeng “CZ” Zhao has called “significant.”

    Binance CEO Changpeng Zhao (CZ) announced on Nov. 8 that his firm was moving to take over rival FTX, which was suffering a liquidity crunch. Since the announcement questions have swirled around the deal, Binance may not follow through because of concerns raised during the due diligence process.

    As a result, the crypto market saw a massive dump earlier this week when Zhao and Bankman-Fried confirmed that Binance intended to acquire FTX. The news sent the price of FTX’s native token FTT into freefall, plummeting 78% in less than a day.

    Meanwhile, the SEC and the CFTC aren’t the only government agencies looking into FTX. Last month, the Texas Securities Board began investigating FTX, FTX US, and CEO Sam Bankman-Fried over alleged securities violations, according to a filing.

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