The Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, has suggested similarities between cryptocurrency exchange Binance and collapsed exchange FTX in terms of their alleged use of sister firms to move funds.
Gensler pointed to FTX’s alleged fraud and manipulation involving its sister firm Alameda Research and its founder Sam Bankman-Fried. He stated that there is a business model that bundles and commingles functions that would not be allowed in traditional finance.
On June 5, the SEC filed a complaint against Binance, pressing 13 charges. One allegation claims that funds from Binance and Binance.US were commingled into an account controlled by Merit Peak Limited, associated with Binance CEO Changpeng Zhao. Another allegation accuses Binance.US of engaging in wash trading through its trading firm Sigma Chain, owned by Zhao.
Gensler expressed concerns about platforms and entrepreneurs attempting to build wealth for themselves and their investors through sister organizations, such as hedge funds, that trade against customers. Ripple CEO Brad Garlinghouse suggested that the SEC’s lawsuits were an attempt to distract from the agency’s “FTX debacle.” Some also speculate that FTX’s political donations and lobbying efforts may be factors in the regulatory scrutiny.
Markus Thielen, the head of research and strategy at Matrixport, noted that FTX’s prominence highlighted the potential impact of the crypto industry on U.S. financial stability. He suggested that there may be a sense of embarrassment among those who did not anticipate the issues at FTX, leading them to distance themselves from it.
It’s important to note that while the SEC has not filed a lawsuit against the FTX exchange itself, charges have been filed against its founders and former executives, including Sam Bankman-Fried and Caroline Ellison.
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