Amid ongoing investigations into defunct cryptocurrency exchange FTX, the Commodity Futures Trading Commission (CFTC) questions the due diligence conducted by institutional investors and their liability in connection with the loss of funds. of the users.
Speaking to Bloomberg, Christy Goldsmith Romero, commissioner of the CFTC, stated that the fact that venture capital firms have had to write down their multi-million dollar investments to near zero raises “serious questions” about the due diligence carried out over the past year. .
She raised concerns about FTX CEO John Ray’s revelations in court about not having any record or control over the exchange’s finances.
I’m glad Mr. Ray is finally paying lip service to turning the exchange back on after months of squashing such efforts!
I’m still waiting for him to finally admit FTX US is solvent and give customers their money back…https://t.co/XjcyYFsoU0https://t.co/SdvMIMXQ5K
—SBF (@SBF_FTX) January 19, 2023
I’m glad Mr. Ray is finally talking about getting the exchange back on track after months of crushing such efforts.
I’m still waiting for him to finally admit that FTX US is creditworthy and pay customers back…
The lack of record keeping coupled with “an auditor no one has ever heard of” forces the CFTC to ask questions about the mindset of institutional investors. In this regard, Romero asked a series of questions:
“How is that possible? So are they turning a blind eye? Were they simply distracted by this promise of innovation?
FTX founder and former CEO, Sam Bankman-Fried, used trust as a marketing technique to gain the trust of investors. However, Romero echoed current investor sentiment, saying “we now know that’s not true.”
As a result, he believes that the VC funds backing FTX ignored red flags when it came to due diligence, further questioning his involvement.
“So was there any conflict that prevented them (investors) from paying attention to the due diligence and the facts that they were uncovering?”asked Romero at the end of the subject in question.
Shark Tank star and investor Kevin O’Leary, who once supported FTX, has warned against the potential downfall of unregulated cryptocurrency exchanges. He stated:
“If you ask me is there going to be another collapse to zero. Absolutely. One hundred percent it will happen, and it will continue to happen over and over and over again.”
As Cointelegraph previously reported, according to a report by the National Bureau of Economic Research, up to 70% of trading volume on unregulated exchanges is wash trading.
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