Crypto exchange FTX faces US probe amid market meltdown

FTX, the world's third-largest cryptocurrency exchange by volume, is facing US investigations amid financial turmoil that is causing a sudden meltdown in the cryptocurrency market.

The US Justice Department and Securities and Exchange Commission (SEC) are investigating FTX, according to news reports Wednesday.

The SEC is handling the firm's domestic subsidiary, FTX.US, and hundreds of cryptocurrencies and tokens listed on the exchange. The regulator is also looking into if some of the assets are regarded as securities that should have been registered with the SEC under American trade laws.

The market watchdog may enforce penalties if it concludes that the platform's investors were not protected.

The Justice Department is investigating criminal violations, such as fraud, which could result in prosecutions, according to the reports.

FTX asked Binance, the world's biggest cryptocurrency exchange by volume, for help Tuesday with a buyout. While Binance co-founder and CEO Changpeng Zhao said FTX has "a significant liquidity crunch," the company announced Wednesday that the deal will not go through.

The price of Bitcoin dove below $16,000 late Wednesday, giving up all gains in the past two years, while the crypto market lost more than 20% in value in the last two days.

FTX’s founder and CEO Sam Bankman-Fried apologized to investors in a series of tweets Thursday.

"I'm sorry. That's the biggest thing. I (expletive) up, and should have done better," he wrote. "Because at the end of the day, I was CEO, which means that *I* was responsible for making sure that things went well. *I*, ultimately, should have been on top of everything. I clearly failed in that.”

Bankman-Fried said FTX's priority in the future will be "radical transparency" so that all involved actors would have full information about the firm's operations.

"All of the stakeholders would have a hard look at FTX governance. I will not be around if I'm not wanted. All of the stakeholders--investors, regulators, users--would have a large part to play in how it would be run. Solely trust," he said.

He noted that the company’s financial turmoil was about FTX International, while the US-based exchange, FTX.US, has not been financially affected.

SEC Chair Gary Gensler emphasized that investors should be protected more in the industry.

"The laws are clear and look the runway is running out. I mean, the American public and investors around the globe are getting hurt by a field that says, they put a lot of fancy talk around it," he told the CNBC network. "When you mix together a bunch of customer money, non-disclosure and leverage borrowing against it and inside, you know, these companies trading, investors get hurt."

Gensler, who has been an advocate for tighter regulation in the crypto market, stressed that companies in the sector are "significantly non-compliant” but argued that one of the best ways to protect investors in the industry is to "work hand-in-hand" with those firms.

"This is a very interconnected world in crypto with a few concentrated players of the middle and one of those concentrated players would have the toxic combinations of lack of disclosure, customer money, a lot of leverage meaning borrowing and then trying to invest with that," he said.

Source: Anadolu Agency