It was announced this morning by Bloomberg that the SEC and CFTC are in the midst ongoing investigations involving FTX. The investigations are centered around handling customer funds, which is ironically SBF’s (FTX’s founder) ‘top’ priority. However, not only is the SEC probing on the customer funds issue, they’re also looking into FTX’s relationship with Alameda (SBF’s trading firm).
Perhaps the most concerning part of this news for SBF and FTX is that these investigations started before the liquidity crisis and impending collapse spurred by Binance leader, CZ. This is a massive issue for FTX and affiliated partners. Clearly there was something going on behind the scenes that tipped off the SEC and CFTC to start their investigations here, and now that the seams are busted wide open, it’s going to be easier than ever for them to build evidence against the firm and founder.
To make matters worse, this news is dropping after CZ said Binance would potentially buyout FTX. Having practiced in M&A for years, and been involved in transactions between financial services firms, a government investigation is about the very biggest and brightest red flag of them all. This is the type of thing that can spike a deal even when speculated, let alone flat out confirmed. NFA, but from a diligence perspective, I highly doubt this takeover transaction goes through unless there is a material change in the investigation status. That means lost funds for countless users.
We’re about to enter an extremely volatile period, and people are going to go from down bad, to down absolutely horrendous. Be careful.
FTX Under Investigation by SEC & CFTC
