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Home Regulation

FTX CEO can End Up in Jail, SEC, DOJ Probing

by Chiwuike Owunwa
Nov 10, 2022 - 12:00 am
in Regulation
FTX CEO can End Up in Jail

The SEC is looking into the current liquidity crunch FTX is experiencing which is currently valued at around $6 billion. And speculation is that the Department of Justice is probing the issue as well. So things are not looking good for FTX’s CEO, Sam Bankman-fried.

It was widely believed that FTX’s current predicament was a result of CZ’s tweet with regard to dumping the FTT in their portfolio. Then on the 9th of November 2022, Binance made an announcement.

As a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged US agency investigations, we have decided that we will not pursue the potential acquisition of https://t.co/FQ3MIG381f.

— Binance (@binance) November 9, 2022

The announcement was that Binance was stepping away from the deal to acquire FTX.

They cited a couple of reasons. One, FTX mishandled the funds customers entrusted to them. Two, US agencies were currently investigating FTX for breaking US securities laws.

The above tweet was initially seen as a scheme by CZ and Binance to discredit SBF and FTX. Thus burying his rival, deeper into the red. Now it seems there is more to that allegation. Word came out on the same day that the SEC, commodity futures trading commission (CFTC), and the Department of Justice (DOJ) have had their sights set on FTX for months.

FTX is a centralized crypto exchange that isn’t allowed to lend users assets as a traditional bank would, nor are they supposed to have a fractional reserve. The full concept of cryptocurrency and blockchain is to mitigate establishments from using users’ funds without permission.

FTX was supposed to protect their users’ funds, and only collect fees from trades. So the current liquidity crunch, means that FTX gambled with customers’ assets and they do not have the capacity to cover customer funds 1:1.

Added to that it also means that it used FTT in conjunction with its sister company, Alameda, to inflate its value putting up a fake front to hide its insolvency.

If the US agencies are successful in getting evidence that FTX used their users’ funds to affect the market and bet against their users. Regardless of his condition, Sam Bankman-fried would be tried for his crimes with jail time in view.

Tags: FTXSEC
Chiwuike Owunwa

Chiwuike Owunwa

Chiwuike is a frontend programmer and writer with 3 years experience in the Web3. He's meticulous researcher, enthusiastic about Blockchain and the future of crypto, DeFi, and the Metaverse.

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