DOJ and SEC Investigate FTX Collapse as Crypto Market Crashes

A screenshot from an FTX ad featuring comedian Larry David that ran during the Super Bowl in February 2022.

A screenshot from an FTX ad featuring comedian Larry David that ran during the Super Bowl in February 2022.
Screenshot: FTX / YouTube

The Department of Justice and the Securities and Exchange Commission are investigating cryptocurrency platform FTX, which suspended withdrawals on Tuesday. The Wall Street Journal. While the SEC’s investigation has reportedly been going on for “months,” the agency’s investigation only widened this week after the liquidity crisis at FTX sent the entire cryptocurrency market crashing.

The investigation by the SEC concerns FTX’s US exchange,, and the coins listed there. The Wall Street Journal. The SEC is also investigating whether FTX loan products can be considered securities, which would require the company to register them with the SEC.

The debate over whether cryptocurrencies are securities or currencies has been going on for years, with cryptocurrency advocates trying to argue that cryptocurrencies, like Bitcoin, are a currency. If cryptocurrency is truly a currency, this means that investors will not face significant tax implications, just as people would not normally be taxed for holding US dollars. But if they are securities, as SEC chief Gary Gensler has previously argued, Bitcoin could be regulated along with the tax implications of any other security, such as stocks you can buy on an exchange.

It’s unclear whether a DOJ probe has been in the works for some time, though investigators have reportedly contacted the SEC. The Wall Street Journal. It’s also unclear whether FTX’s sister organization, Alameda Research, is part of any potential criminal investigation. Alameda Research was backed by at least $4 billion in FTX funding, according to a new report. ReutersAfter Alameda It made some bad bets on things like Voyager Digital, a crypto lender that recently declared bankruptcy. The Justice Department did not respond to a request for comment Thursday.

CEO FTX and AlamedaSam Bankman-Fried has not been seen for several days, with rumors swirling on social media as to his whereabouts – the Bahamas being a popular rumor on Twitter, although there is no evidence to suggest he has actually fled the continent. US But after Binance made a potentially brief gesture buy the companyit’s no wonder SBF, as it’s often called, wants to lie low for a while, only to retreat after seeing the books.

FTX is reportedly trying to get about $1 billion in bailouts from Wall Street firms, though so far it has come up empty-handed. According to the news outlet, most of the FTC’s legal and compliance teams were out of business on Tuesday. Semaphorethis certainly raises questions about whether FTX will be able to bounce back.

The straw that broke the camel’s back on FTX was the decision by Binance CEO Changpeng Zhao, also known as CZ, to sell a large cache of FTX’s native token, FTT. Zhao bought a 20% stake in FTX in 2019, but Zhao and Bankman-Fried fell out in mid-2021 as FTX tried to obtain a financial license to operate in Gibraltar. Reuters. Regulators have requested financial information from major shareholders, including Zhao, but the Binance CEO appears reluctant to hand over the documents.

As a result of Zhao being stonewalled, Bankman-Fried bought Zhao for about $2 billion, which included a lot of FTT tokens, according to Reuters. Zhao’s decision to begin selling about $580 million of the coin this week, which he publicly announced on Twitter, has hit fans for FTX.

News of investigations at the DOJ and SEC is compounded by a sharp drop in the entire cryptocurrency market, general skepticism of digital counterfeits, and now problems at the FTX. It was last February when FTX aired the ad During the Super Bowl featuring humorous skeptic Larry David. The ads sought to portray cryptocurrency skeptics as unnecessarily wary of the industry, failing to see the genius of investing in coins like Bitcoin and Ethereum. In retrospect, Larry David’s character was smart.

Don’t Miss Crypto: Larry David FTX Commercial

Bitcoin is currently trading at around $16,580, up 8% from just 24 hours ago and the lowest level for the cryptocurrency in two years. Bitcoin’s all-time high was exactly one year ago, when it was above $69,000. Ethereum, the second most popular cryptocurrency, is currently trading at $1,180, down nearly 7% from a day ago.

FTT, the native token on FTX, is currently trading at just $2.95, down 33% from 24 hours ago and 88% from a week ago. FTT was trading at $60.16 a year ago today.

Several other cryptocurrency platforms and coins have exploded in the past year, including Celsius, which has stopped pulling back in June before filing for bankruptcy and reportedly owed $4 billion to users. The Luna cryptocurrency created by Do Kwon has become worthless back in May. Freeway has promised revenue as a UK-based cryptocurrency As high as 43%also exploded last month.

What’s next for FTX and will people who put their money on the platform see their coins again? Unfortunately, no one knows the answer to these questions yet. But any day that goes by without a major company rescue is a bad sign.

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