US Regulators Are Investigating FTX Lending, Handling Of Client Funds: Report

Zinger Key Points
  • U.S. regulators ascertaining relationship between FTX and FTX.US.
  • The probe started months ago, according to sources.
US Regulators Are Investigating FTX Lending, Handling Of Client Funds: Report

U.S. financial regulators are reportedly looking into whether troubled cryptocurrency exchange FTX appropriately handled customer cash and its connections to other units of Sam Bankman-Fried's crypto businesses.  

The news comes on the heels of a report that FTX's acquisition talks with rival Binance may be falling apart.

The Securities and Exchange Commission and the Commodity Futures Trading Commission are both probing the liquidity crisis at the trading platform that prompted a rival exchange, Binance Holdings Ltd., to sign a letter of intent to acquire its non-U.S. operations, Bloomberg reported Wednesday. 

The platform's connections to FTX.com's U.S. counterpart FTX US and Bankman-Fried's trading firm Alameda Research are also being investigated by regulators, the report said. .

Probe Started Months Ago: Report 

Quoting two sources, the Bloomberg report said the SEC's investigation started as a probe of FTX US and its crypto lending activities months ago.

Binance CEO Changpeng Zhao rattled the cryptocurrency community on Tuesday by announcing that his company was attempting to acquire rival FTX, which was experiencing a liquidity crisis.

After less than a day of assessing the company, cryptocurrency exchange Binance is “very unlikely” to proceed with its proposed acquisition of struggling rival FTX, Coindesk said in a Wednesday report. 

Due diligence was a condition of Binance's non-binding letter of intent for the acquisition, which was made public on Tuesday as FTX's financial situation appeared to be spiraling out of hand.

After evaluating FTX's internal data and loan agreements for around half a day, Binance has decided strongly not to complete the deal, Coindesk said, citing an anonymous source.

Crypto Market Pulls Back

The apparent fallout of the FTX acquisition deal sent the cryptocurrency market spiraling, with Bitcoin BTC/USD down 16% and breaking the $17,000 mark for the first time since November 2020.

Other major cryptocurrencies are plunging: Ethereum ETH/USD is down 25%. Binance BNB/USD is down 23%, and Ripple XRP/USD, Cardano ADA/USD and Solana SOL/USD are down 20%, 13% and 45%, respectively.

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Photo via Shutterstock. 

Posted In: Alameda ResearchBinanceBloombergCFTCChangpeng ZhaoFTXSam Bankman-FriedCryptocurrencyNewsTop StoriesSECMarketsMedia

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