By
Steve Muchoki
April 26th, 2024
Following the recent liquidity crisis, SEC and the CFTC have launched an investigation into the operations of FTX US and understanding its relationship with its international entity FTX.com.
As the current development surrounding the liquidity crisis at crypto exchange FTX, the US Securities and Exchange Commission (SEC) is now investigating Sam Bankman-Fried over the potential violations of securities rules, said sources familiar with the matter.
Earlier on Wednesday, Bloomberg News reported that FTX.com, its American entity FTX US, and their trading house Alameda Research are currently under investigation by the SEC. The SEC is reportedly scrutinizing the reason behind what led to the sudden crash of one of the world’s largest crypto trading platforms.
So far on this matter, representatives at FTX.com and the SEC have refrained from commenting. Along with the SEC, the US Commodities and Future Trading Commission (CFTC) is also investigating the liquidity crisis that pushed FTX to the brink.
Some sources familiar with the matter also stated that the SEC’s scrutiny of FTX US started a few months ago while looking into the platform’s crypto-lending activities. The sources also said that the regulators are now looking into the ownership structure of both – FTX US and FTX.com.
Regulators are interested in knowing any possible overlap between the management and board structures as well as the financial relationship between the two entities. Besides, the agencies are also looking at whether the customers’ accounts were properly segregated.
But in a tweet on Thursday, FTX chief Sam Bankman-Fried said that FTX US was “100% liquid” and “not financially impacted” by FTX International’s problems.
Bahamas Securities Regulator Freezes FTX’s Assets
As per the recent development, the Bahamas securities regulator has decided to freeze the assets of FTX.com’s local trading subsidiary – FTX Digital Markets – and “related parties”.
The securities regulator called this decision as the “prudent course of action” to preserve assets and stabilize the company. The Bahamas Securities Commission as FTX.com has been registered in the country. This is also the first action initiated by the Bahamas authorities ever since the FTX crisis unraveled over the last week. The Bahamas Securities Commission said:
“The commission is aware of public statements suggesting that clients’ assets were mishandled, mismanaged and/or transferred to Alameda Research. Based on the commission’s information, any such actions would have been contrary to normal governance, without client consent and potentially unlawful.”
The agency can also take control of FTX with the appointment of the liquidator.