The cryptocurrency exchange FTX is heading into insolvency. Its creator, Sam Bankman-Fried, may face incarceration.
The SEC is investigating whether FTX misused customer funds. From Bloomberg:
Bloomberg News reported on Wednesday that the Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating the firm’s handling of customer funds and its relationship with other parts of Bankman-Fried’s crypto empire, including his trading firm Alameda Research. According to one source, Justice Department officials are collaborating with SEC lawyers.
It has been months since FTX was on the brink of bankruptcy, but this probe has been going on for much longer. In dispute are SBF’s extensive interests. He also established crypto hedge fund Alameda Research and exchanges FTX and FTX US. It is possible that FTX unlawfully transferred customer funds among themselves. It’s possible that SBF was attempting to patch up some other portion of his business empire. We can use a throwback economic illustration to demonstrate how obviously wrong this is. Put yourself in a world where Bank of America also operated a hedge fund. Bank of America will take money from your checking account to bail out a failing hedge fund. Recognize the issue, eh? This might mean a long jail sentence for SBF if proven accurate. Do Kwon, creator of Terra, may have gone on the run as his business collapsed and federal agents were closing in. For someone whose wealth was estimated at $15 billion only one day before, this would be a shocking turnaround. Speculate on where you see FTX and SBF going from here. Please share your thoughts by posting a comment below. This site will be taking tomorrow off in observance of Veterans Day. Take care, and we’ll chat on Monday.