FTX investigations pile up from regulators after crypto exchange’s collapse sends rivals scrambling to calm investors
- The US Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission are all investigating FTX
- Rivals such as Crypto.com and Binance have sought to reassure investors on their health as cryptocurrency values have plunged
Regulators opened probes following last week’s spectacular collapse of crypto exchange FTX and rival exchanges sought to reassure jittery investors of their own stability, weighing on cryptocurrencies on Monday.
The implosion of FTX, once a darling of the crypto industry with a US$32 billion valuation as of January, has spurred investigations by the US Justice Department, the Securities and Exchange Commission and Commodity Futures Trading Commission, a source with knowledge of the investigations said.
The SEC probe is also targeting FTX executives, their knowledge of the handling of customer funds and any potential breaking of securities laws, a second source with knowledge of the investigation said.
While the crypto industry has touted digital assets as fundamentally different from traditional finance, the sector has proven to be susceptible to the same risks and should be subject to the same rules, Federal Reserve Vice Chair Lael Brainard said on Monday.
“Crypto finance, because it is no different than traditional finance in the risks that it exposes, needs to be under the regulatory perimeter,” she told Bloomberg in an interview, repeating a long-held view.
Separately, Michael Barr, the Fed’s top regulatory official, signalled on Monday that stiffer oversight of cryptocurrencies are coming. This includes “safeguards” to ensure crypto companies are subject to similar rules as other financial firms, Barr said in written testimony released before an appearance at the Senate Banking committee on Tuesday.
US Senator Sherrod Brown, a Democrat who chairs the committee, also weighed in.