Yesterday, the cryptocurrency market was shaken after learning that FTXone of the most important exchange platforms in the world, would be bought by Binance. The news was made official by Sam Bankman-Fried, its founder and CEO, just after the firm was left in the middle of the storm due to a liquidity crisis. However, the rescue is far from the solution to all their problems.
It is that both Bankman-Fried and FTX are in the crosshairs of two US regulatory bodies. We are talking about the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), who want to know if the platform wasted their customers’ money.
Although the SEC investigation began in recent months, it has deepened after the events of recent days. Originally, this body was analyzing the loans made by FTX US, the subsidiary of the exchange of cryptocurrencies that works in the United States. However, now he plans to expand his reach.
The focus of regulatory scrutiny is now set on the relationship between the different legs of the Bankman-Fried crypto empire. Note that FTX has a global platform (FTX.com), and a subsidiary that is only available in the US for regulatory reasons (FTX.us). In addition, the businessman owns Alameda Research, a firm of trading and cryptocurrency investments which, in a way, was what triggered the liquidity crisis.
Another important point to mention is that Binance’s purchase only impacts FTX.com, and not FTX.us. In addition, Binance US, the North American subsidiary of the firm led by Changpeng Zhao, does not participate in the transaction.
FTX, in the crosshairs of US regulators
In the specific case of the CFTC, Bloomberg it does not detail which are the points that it investigates. However, it mentions that said body usually intervenes in the field of cryptocurrencies. when you believe there is fraud or market manipulation. Thus, it would not be surprising for said regulator to investigate what happened with FTT, the native FTX token.
FTX’s troubles began when a report surfaced that Alameda Research’s balance sheet, valued at nearly $15 billion, was largely made up of FTT and other cryptocurrencies of little or no value or demand. This caused rumors to begin your possible insolvencya situation that worsened when Binance announced that it would sell its holdings in said token.
The strong link between Alameda and FTX—they are sister companies, after all—raised fears that the latter’s finances were not as healthy as claimed. That’s how it came about a kind of bank run in which a large part of the FTX users tried to withdraw their funds from the platform, until withdrawals were suspended.
In this way, in less than 48 hours, FTX went from being one of the exchanges from top cryptocurrencies worldwide, to being another crypto giant affected by illiquidity.
Binance’s bailout is still not certain, as Changpeng Zhao’s company has the power to pull out of the deal at any time. Amid the din, the Chinese-Canadian businessman took to Twitter to wet his ear to Bankman-Fried and FTX. “Two big lessons. Never collateralize a token you’ve created, and don’t borrow if you have a cryptocurrency company. Don’t use capital ‘efficiently’; have a large reserve. Binance has never used BNB as collateral and we have never indebted”, tweeted.
For now, FTT does not stop its fall. The token, which 48 hours ago was selling for $22, now trading just above $3.