U.S. securities regulator probes FTX investors’ due diligence -sources

Chris Prentiss

NEW YORK (Reuters) – The U.S. Securities and Exchange Commission (SEC) is seeking details on FTX investors’ due diligence as the aftermath of the FTX bankruptcy unfolds, two sources familiar with the investigation said. there is

The SEC has so far indicted three FTX chief executives, accusing them of cheating investors on the crypto trading platform, which has since filed for bankruptcy.

The SEC is now asking financial institutions what due diligence policies and procedures they have in place and whether they followed them when choosing to invest in FTX, the sources said. I’m here.

The source declined to be identified because the investigation is private.

Reuters was unable to identify the number of companies that responded to such inquiries from regulators. The SEC claims the Bahamas-based cryptocurrency exchange has raised more than $1.8 billion from equity investors, including 90 of his U.S.-based investors, since May 2019. I’m here.

The SEC investigation did not indicate any wrongdoing, and Reuters was unable to confirm whether these companies were the subject of the investigation. However, sources said the SEC’s investigation could expose venture capital firms and investment funds that invested in FTX to regulatory scrutiny, even if they are considered victims of Bankman-Fried’s alleged scheme. It is said that there is a possibility that it means that there is The question, they said, is whether the companies are fulfilling their fiduciary duties to investors.

Reuters and others have previously reported that U.S. authorities have sent document requests to FTX investors and potential investors asking for details regarding communications with FTX officials.

Those investigations preceded the SEC’s indictment last month against FTX founder Sam Bankman-Fried for allegedly defrauding such investors. Investor investigations by the SEC continue after the SEC filed those charges, and the agency is now shifting its focus to companies’ diligence, the sources said.

An SEC spokeswoman declined to comment.

Once considered the White Knight of the crypto industry, FTX collapsed in less than two weeks due to a liquidity crisis. FTX he filed for bankruptcy in November, and the new CEO later described it as a “complete failure of corporate control.”

The SEC, Department of Justice, and Commodity Futures Trading Commission have indicted FTX founder and former CEO Sam Bankman-Fried for fraud. On Tuesday, he pleaded not guilty to criminal charges involving wire fraud and money laundering Tuesday.

Two former top associates, former Alameda CEO Caroline Ellison and former FTX Chief Technology Officer Gary Wang, both pleaded guilty.

(Reporting by Chris Prentice and Krystal Hu; Editing by Megan Davies and Anna Driver)

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