SEC Investigates Whether FTX Investors Followed Due Diligence Procedures (Report)

The US Securities and Exchange Commission has reportedly asked some FTX investors whether they conducted proper research on the cryptocurrency exchange before becoming its clients.

Recall that the platform (considered among the giants in its field) crashed in November, causing multi-billion losses and shaking the entire market to its core.

• As reported by Reuters, the American financial regulator sought information from several firms regarding their due diligence policies before investing in FTX.
• The SEC’s inquiry aims to determine the investors’ incentive to choose the crypto platform and whether they followed any strategies at all.
• The examination does not mean those companies are targets of the investigation against FTX and its former CEO – Sam Bankman-Fried (SBF).
• However, it could indicate that investment funds and venture capital firms exposed to the exchange could become a subject of regulatory scrutiny despite being viewed as victims of the alleged scam.
• US authorities previously sought information from investors of FTX regarding their dialogue with the company’s bosses.
• The demise of the trading venue is among the darkest events ever in crypto’s history. The organization, once valued at $32 billion, experienced severe liquidity issues in November and failed to honor customer withdrawal requests.
• It filed for bankruptcy protection, while its former CEO – SBF – was arrested and sent to the Fox Hill Prison in the Bahamas.
• The authorities later deported him to the US, where he was released on a record $250 million bond. Currently, he resides in his parents’ house and must constantly wear a monitoring device.
• He recently pleaded not guilty to the charges that he knowingly defrauded investors for billions of dollars. His trial date is set for October 2.

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