Things are going from bad to worse for FTX, which was the second-largest crypto exchange in the world – just last week.
Reports have filtered in that regulators, including the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are “probing” FTX.us as well as Alameda – the trading group controlled by FTX CEO Sam Bankman-Fried. Allegations have been raised regarding poor controls and operational shortcomings in the relationship between FTX and Alameda as vapor coin FTT (FTX’s native token) – held on Alameda’s balance sheet – has collapsed in value (trading at just over $3 from a YTD high of $50).
Bloomberg reported: “according to three people familiar with the matter. The SEC’s scrutiny started months ago as a probe into FTX US and its crypto-lending activities said two of the people, who weren’t authorized to speak publicly on the matter.” The report stated that the SEC, CFTC, and FTX had not responded to requests for feedback.
Meanwhile, speculation is rising that Binance will balk at acquiring FTX, with some indicating FTX may be worth zero. This gives rise to the question of what happens to the entire crypto sector if Binance does not act to right the ship. Beyond the painful reality that a lack of regulation and oversight – combined with poor management has harmed the entire crypto industry, a failure at FTX may turn once supporters against the crypto sector.
Crypto Twitter is already wondering if charges are in the works for Sam Bankman-Fried, and reports are out that FTX’s entire compliance team has fled.
2/2 If this is true, the two companies under common control and ownership did self-dealing using an illiquid native token as collateral and our customer funds at risk…in which case some legal and regulatory action on FTX and SBF is likely imminent.
— Sanjay Raghavan (@eth_sanjay) November 9, 2022