SEC Now Investigating FTX Investors

The effects of the FTX collapse continue to echo throughout the entire industry and the broader market.

FTX allegedly engaged in a wash trading scheme with the trading arm of its conglomerate, Alameda Capital, and former CEO Caroline Ellison recently pleaded guilty to the charges against her.

From the point of view of the public, pundits, independent media, and investors this is a pretty open-and-shut case of the classic Ponzi scheme and emblematic of age-old fraud…

However, the SEC wants to expand the scope of its investigation to include investors and creditors of FTX—yes you read that right.

According to reports, the regulatory agency wants to figure out if investors in the now-defunct crypto exchange and conglomerate did their due diligence before forking over money to FTX.

Perhaps the investigation will turn up some concerning links or findings to a puzzle that potentially represents the greatest political scandal of our time, or perhaps it is simply another attempt by the SEC to shift blame.

Here are the latest developments in the ongoing FTX investigation:

🔔U.S. Securities Regulator Probes FTX Investors' Due Diligence

The U.S. SEC is looking for information regarding #FTX investors' due diligence as the repercussions from the crypto firm's failure spread.https://t.co/ywCo0wIMSq

— Forever HODL ₿ (@granitacademy) January 6, 2023

Previously, political representatives have been critical of SEC chairman Gary Gensler, for his failure to prevent the collapse of FTX, and even accused him of being in on the scandal.

Others point the finger directly at the regulatory agency and ask what the purpose of the agency is in the first place if it cannot prevent massive failures such as these:

Grayscale’s trusts are $7.5 billion underwater, a greater nominal loss to investors than FTX, and the sponsor must fight to keep it so in order to save its parent.

That sort of investor misalignment shouldn’t be possible for SEC reporting companies.

What’s the point of the SEC?

— Ryan Selkis 🥷 (@twobitidiot) January 5, 2023

Gensler presides over MF Global as CFTC Chair: Dog and Pony Show Hearings. Nothing happens to him for the fraudster.
Gensler presides over FTX as SEC Chair: Is a New Day Coming Congress??? @RepTomEmmer @PatrickMcHenry The world is watching! pic.twitter.com/o5k3dUiI3E

— Digital Asset Investor (@digitalassetbuy) January 2, 2023

Reuters reports:

The SEC inquiries do not indicate wrongdoing and Reuters could not ascertain if the firms are targets of the probe. But the sources said the SEC inquiries may mean the venture capital firms and investment funds that invested in FTX could face regulatory scrutiny even if they are considered victims of Bankman-Fried’s alleged scheme.

At issue would be whether the firms met their fiduciary duties to their own investors, they said.

 

SEC looking into VCs' potential legal liability concerning fiduciary duty to their funds' investors.

This is a good, Sequoia et al. can't simply delete everything and write off the loss.

Who knows what gets uncovered in the investigation? Perhaps creditors can have claims? pic.twitter.com/Y0ZYLJVOR2

— FTX Creditor (@AFTXcreditor) January 6, 2023

CoinDesk adds:

The collapse of FTX, which filed for Chapter 11 bankruptcy on Nov. 11, has led to a slew of legal cases. Bankman-Fried has also been charged by the U.S. Commodity Futures Trading Commission and Department of Justice, and pleaded not guilty to money laundering and wire fraud in a New York court on Tuesday.

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