Regulators circle FTX as rival exchanges try to calm investors

- Advertisement -

  • U.S. Justice Department, SEC and CFTC probing FTX, sources say
  • Fed’s Brainard: crypto should be under traditional finance rules
  • CEO says it will publish proof of reserves
  • Bitcoin steadies around $16,590

NEW YORK, Nov 14 (Reuters) – Bitcoin and other cryptocurrencies were under pressure on Monday following last week’s spectacular collapse of crypto exchange FTX, while regulators opened probes and rival exchanges sought to reassure jittery investors of their own stability.

The implosion of FTX, once a darling of the crypto industry with a $32 billion valuation as of January, has spurred investigations by the U.S. Justice Department, the Securities and Exchange Commission and Commodity Futures Trading Commission, a source with knowledge of the investigations said.

The SEC’s probe is also targeting FTX executives, their knowledge of the handling of customer funds and any potential breaking of securities laws, a second source with knowledge of the investigation said.

While the crypto industry has touted digital assets as fundamentally different from traditional finance, the sector has proven to be susceptible to the same risks and should be subject to the same rules, Federal Reserve Vice Chair Lael Brainard said on Monday.

“It reinforces I think this need to make sure that crypto finance, because it is no different than traditional finance in the risks that it exposes, needs to be under the regulatory perimeter,” she said.

FTX filed for bankruptcy on Friday in one of the highest-profile crypto blowups after frenzied traders withdrew $6 billion from the platform in just 72 hours and rival exchange Binance abandoned a proposed rescue deal.

Bitcoin , which hit a record high of $69,000 a year ago, slid back below $16,000 early on Monday before recovering to trade at $16,590, up 1.72% at 2 p.m. EST (1900 GMT). Down around 18% in November, bitcoin is set for its biggest monthly percentage decline since June when the fallout from the failure of stablecoin TerraUSD roiled markets.

FTX’s token was worth just $1.30, down 94% in November, while’s Cronos token has halved in the past week to 6 cents, according to price site Coingecko.


The rapid downfall of FTX, once a white knight for struggling crypto firms, has sent shock waves through the crypto industry, which is bracing for further fallout.

LedgerX LLC, an FTX subsidiary, on Monday formally withdrew its request from last December with the U.S. Commodity Futures Trading Commission to allow it to offer products that are not fully collateralized.

Cryptocurrency lender BlockFi, which signed a deal with FTX to provide it with a $400 million revolving credit facility with an option to buy it for up to $240 million, said on Monday it has significant exposure to FTX.

Other crypto exchanges have been publishing details of their reserves and promising further disclosures in an attempt to soothe investor nerves amid unverified rumors.

The logo of FTX is seen at the entrance of the FTX Arena in Miami, Florida, U.S., November 12, 2022. REUTERS/Marco Bello

Kris Marszalek, chief executive of Singapore-based crypto exchange, which made headlines in 2021 with a $700 million deal to rename the Staples Center in Los Angeles the Arena and whose platform was promoted in a commercial featuring actor Matt Damon, rebutted suggestions it was in trouble.

In an “ask-me-anything” YouTube livestream on Monday, Marszalek said the exchange always maintained reserves to match every coin customers held on its platform and that an audited proof of’s reserves will be published within weeks.

The move came after investors took to Twitter over the weekend to question a transfer of $400 million worth of ether tokens to the exchange on Oct. 21.

Marszalek tweeted on Sunday that the ether was recovered and returned to the exchange, but the Wall Street Journal reported withdrawals at rose over the weekend.

A spokesperson did not respond to a request for comment on whether the platform’s outflows continued on Monday. is among the top 10 such exchanges by turnover globally, but smaller than FTX and market leader Binance.

Another crypto exchange, Kraken, said on Twitter on Sunday that it froze the accounts of FTX, affiliated crypto trading firm Alameda Research, and their executives.

“We have actively monitored recent developments with the FTX estate, are in contact with law enforcement, and have frozen Kraken account access to certain funds we suspect to be associated with ‘fraud, negligence or misconduct’ related to FTX,” a Kraken spokesperson said.

Separately, smaller, Asia-based exchange AAX halted withdrawals over the weekend, citing failures at an unnamed third-party partner during a scheduled-system update.

AAX said it hoped to resume regular operations in seven to 10 days, but in a note to customers said: “In light of the insolvency of one of our industry’s largest players last week, crypto users are rightfully concerned about the operational and financial stability of centralized digital asset exchanges.”

Changpeng Zhao, CEO of Binance, the world’s largest crypto exchange, said he would look to create an industry recovery fund to help projects that were “otherwise strong but in a liquidity crisis.”

Binance last week signed a nonbinding letter of intent to buy FTX’s non-U.S. assets but later abandoned the deal, precipitating its bankruptcy. Zhao has since warned of a “cascading” crypto crisis.

Reporting by John McCrank in New York, Vidya Ranganathan in Singapore and Alun John in London
Additional reporting by Chris Prentice in New York, Xinghui Kok in Singapore and Elizabeth Howcroft in London
Editing by Kirsten Donovan, Jonathan Oatis and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

Read More: Regulators circle FTX as rival exchanges try to calm investors

- Advertisement -

Notify of
Inline Feedbacks
View all comments