SEC and DOJ investigating collapsing firm at center of cryptocurrency bloodbath

Crypto Wild Week
The Department of Justice filed charges in the first-ever digital asset insider trading scheme on June 1, 2022. (AP Photo/Kin Cheung, File) Kin Cheung/AP

SEC and DOJ investigating collapsing firm at center of cryptocurrency bloodbath

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The Securities and Exchange Commission and the Justice Department are investigating a cryptocurrency platform whose high-profile struggles are at the center of a crypto meltdown.

Staff from the two agencies were coordinating to examine recent developments involving the crypto firm FTX, according to the Wall Street Journal. The firm is on the brink of collapse and bankruptcy after a proposed bailout from competitor Binance fell through.

“I’m sorry,” tweeted FTX founder Sam Bankman-Fried on Thursday. “That’s the biggest thing. I [messed] up and should have done better.”

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The failed Binance deal led to a significant drop in value in the crypto market. Ethereum, the second-largest cryptocurrency by market cap, shed more than 25% of its value on Wednesday. Cardano decreased more than 13% while Ripple sank by 20%. And the value of Binance coin has dropped by more than a quarter since the troubles at FTX began.

Federal pressure on FTX has been going on for months.

SEC leaders may use the FTX fiasco to implement additional regulations on the unregulated market. Crypto investors need better protections in a “significantly non-compliant” space, SEC Chairman Gary Gensler told CNBC.

“The runway is running out. Investors around the globe are getting hurt,” Gensler added. Gensler has long argued that more crypto assets should be considered securities and thus regulated by the SEC.

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Bankman-Fried has not supported Gensler’s view of the crypto industry and has invested tens of millions in influencing Congress. The crypto billionaire was the second-biggest Democratic donor in the 2022 midterm elections. Bankman-Fried’s worth dropped from $15 billion to $1 billion in recent days as the company encountered trouble.

© 2022 Washington Examiner

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