Cryptocurrency, Cryptocurrency Custody, News, Price Analysis, Regulation

US CFTC and SEC Begin Probe into FTX Operations

The call has grown louder again for clear crypto regulations in the US crypto space. This comes with the ongoing travails of FTX amidst its liquidity crisis.

Looking into Fund Management

The US Security and Exchange Commission started an investigation into FTX’s management of users’ funds. It became necessary for the regulator as things began to fall apart in the exchange.

Bloomberg reported that the US SEC is trying to find out if the FTX exchange mismanaged users’ funds. They are equally trying to find out the extent of FTX’s relationship with other companies linked with Sam Bankman-Fried such as Alameda.

The recent liquidity crunch has put FTX on the spot. Its FTT native token has now collapsed as it swept away over $3 billion of its market worth. The problem got more complicated after Binance withdrew from its acquisition bid under the guise of mismanaged funds and investigations from US agencies.

The US Commodities and Futures Trading Commission is equally investigating FTX at the same time as the SEC. Sources close to the case clarified that the SEC began investigating FTX US operations some months ago. The reason is said to be to look into its lending activities.

Furthermore, regulators in the US have been looking keenly into Alameda Research’s operation for a while. No representative of the regulatory bodies has made any comments on the recent developments.

 Calls For More Regulation

The huge liquidity crunch hitting FTX has once again instigated calls for clear US crypto regulations. It also drew the attention of lawmakers in the country. Senator Elizabeth Warren for one.

She has said via her Twitter page that FTX’s troubles reveal how the crypto sector might be just smoke and mirror. She, therefore, advocated for aggressive regulatory enforcement. While she promised to keep pushing the SEC to enforce it for the protection of users.

For now, the CFTC is limited to derivatives in the crypto sector. It can, however, perform enforcement where there is fraud or market manipulation within the crypto space. Note also that the SEC claims to have oversight of digital assets that ordinarily qualify as securities.

Both of them have requested ownership details in the structure of FTX US and provides its service to clients outside the US. But the regulators wish to know if there is a management overlap.

The regulators also wish to know if customer accounts in both entities are kept differently. The FTX crisis has had an impact on the wider crypto market. The market has lost close to $200 million in under one week since the crisis began.

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