FTX Bankruptcy: US Prosecutors Began Probing Crypto Exchange Months Before Collapse: Report

Several crypto firms have since been bracing for a fallout from the FTX collapse, with many counting their exposure in millions to the exchange.

FTX Bankruptcy: US Prosecutors Began Probing Crypto Exchange Months Before Collapse: Report

Photo Credit: FTX

FTX filed for US bankruptcy protection after Binance walked away from a proposed acquisition

Highlights
  • FTX's implosion has fanned fears about the future of the crypto industry
  • Bank of England Deputy Governor has called for crypto to be regulated
  • FTX founder Sam Bankman-Fried resigned as chief executive

FTX was on the radar of federal prosecutors in Manhattan months before the collapse of the crypto exchange, Bloomberg News reported on Monday citing people familiar with the investigation. The US Attorney's Office for the Southern District of New York spent months working on a sweeping examination of cryptocurrency platforms that have US and offshore arms including FTX's massive exchange operations, the report added.

A representative of the concerned US Attorney's Office declined to comment on the matter, while FTX did not immediately respond.

The implosion of FTX has spread ripples across the industry, hobbling liquidity at firms with exposure to what was once one of the world's biggest crypto exchanges, prompting investigations by regulators in several countries. It has fanned fears about the future of the crypto industry after FTX outlined a "severe liquidity crisis".

Earlier this month, FTX filed for US bankruptcy protection and its founder Sam Bankman-Fried resigned as chief executive, after rival exchange Binance walked away from a proposed acquisition.

Several crypto firms have since been bracing for a fallout from the FTX collapse, with many counting their exposure in millions to the beleaguered exchange.

On Monday, Bank of England Deputy Governor Jon Cunliffe said the implosion of FTX shows the need to bring the crypto world within the regulatory framework.

"While the crypto world, as was demonstrated during last year's crypto winter and last week's FTX implosion is not at present large enough or interconnected enough with mainstream finance to threaten the stability of the financial system, its links with mainstream finance have been developing rapidly," Cunliffe said.

He said that FTX's troubles highlighted the need for regulators to put in place tighter controls as quickly as possible, adding that the BoE will set out a public consultation to flesh out rules for stablecoins in more detail on how coin holders claims on the issuer and wallets should be structured to deliver redemption at par in line with commercial bank money.

© Thomson Reuters 2022


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