The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) are reportedly investigating the FTX cryptocurrency exchange companies on a number of fronts.
The regulators are looking at possible mishandling of customer funds by FTX.com, the crypto lending activities of FTX US, and the relationships between FTX.com and FTX US and trading firm Alameda Research, which is a sister company of FTX, Bloomberg reported Wednesday (Nov. 9), citing unnamed sources.
Regulators have asked about the ownership structure of FTX US and FTX.com, any overlap between the management and board structures, the financial relationship between the organizations, the investor base and whether customer accounts were segregated, according to the report.
An SEC investigation began months ago, before FTX’s current liquidity crisis, the report stated.
An SEC spokesperson told PYMNTS via email: “The SEC does not comment on the existence or nonexistence of a possible investigation.”
PYMNTS has reached out to FTX, FTX US and the CFTC for comment.
This news comes on the same day The Wall Street Journal (WSJ) reported that cryptocurrency exchange Binance is “likely” to end a potential deal to acquire FTX.
The potential acquisition was driven by a “liquidity crunch” at FTX and both Binance CEO Changpeng Zhao and FTX CEO Sam Bankman-Fried had said in separate tweets that they aimed to see Binance acquire FTX.com, pending due diligence.
On Wednesday, shortly after beginning its due diligence, Binance was reportedly “taken aback” by what it found and “likely” to end the potential deal, according to the WSJ report.
In related news, the SEC announced Sept. 9 that it would add an Office of Crypto Assets to do the work currently done across its Division of Corporate Finance’s Disclosure Review Program (DRP) to look over filings involving crypto.
The SEC said the assigning of companies and filings to just one office would help focus resources and expertise pertaining to crypto.
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