Japan, United States, Europe… Regulators of all persuasions are beginning to crack down on FTX

Regulators are starting to look into the FTX case

The flashfall of FTX has plunged the ecosystem into a certain stupor. Between the aborted takeover of Binance, the arrival with a bang of Tron and rumors of providential help from Kraken, it is not easy to follow the frantic initiatives that aim to save the companywhich was still considered a flagship of the industry at the start of the week.

But flagship or not, regulators don’t wait, and they began to pull out their teeth. Starting with Japan, where the Financial Services Agency (FSA) ordered FTX Japan to cease its activities. Announced yesterday, the measure effectively forces the local branch of FTX to stop all its services, and to keep its funds within Japan, so that they are accessible:

“[La FSA] issued an order so that [FTX Japan] suspend its operationsas well as a restraining order for assets within Japan.“

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In the United States, the SEC takes its teeth out

Unsurprisingly, the SEC of the United States has also looked into the subject. She was explaining that night that she was launching an investigation targeting the CEO of FTX, Sam Bankman-Fried. A source close to the case has indeed revealed to our colleagues at Bloomberg that the American financial policeman wanted to know if SBF had violated the law on financial securities.

As a reminder, the SEC had already looked into FTX.US, the American branch of FTX, but the last few days have pushed the institution to extend the scope of its investigation.

The arrival of the SEC in this matter is of course not a surprise. The institution is already distinguished by a great hostility to the sector, and it made it known yesterday through the voice of its president Gary Gensler that more regulation was necessary for the crypto industry. It will also be recalled that the regulatory body of the Bahamas decided yesterday to freeze the assets of the local subsidiary of FTX.

👉 Learn more – Bahamian financial regulator decides to freeze assets of FTX Digital Markets

The California regulatory body is also looking into the case

Also in the United States, California was the first state to react to the case. The Department of Financial Protection and Innovation (DFPI) has launched an investigation. He invites local people who have been affected to contact him directly, in order to collect complaints.

She showed her determination to go through with the case in a statement, explaining:

“The DFPI takes its monitoring responsibility very seriously. We expect anyone offering financial securities, any lender, or any other financial services provider that operates in California to comply with our financial laws.“

According to the White House, President Joe Biden was also informed of the case. The chair of the Financial Services Committee, Maxine Waters, has also encouraged the implementation of consumer protection measures within the ecosystem.

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Europe’s watchdog is concerned about the situation

The Financial Stability Board (FSB), an independent financial stability monitoring group, issued an alert through its European branch yesterday. After a meeting held in Lisbon yesterday, the group issued a statement, which does not directly name FTX but talks about the crypto industry in general:

“In view of the various developments, decentralized finance, exchanges and so-called crypto conglomerates that integrate multiple functions deserve urgent regulatory measures.“

The FSB includes representatives of the UK Treasury, the Central Bank of Sweden, or French and German financial institutions. We can therefore see it as a warning shot that will be followed by more concrete measures. For the moment, the European Union has not officially reacted, but there is no doubt that the ax will fall on this side as well.

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A coming storm?

The arrival of regulators is therefore just beginning, and the FTX case should continue to trigger a series of regulatory measures. What is also certain is that confidence in the ecosystem has been seriously shaken by this crisis. A consequence that Jessy Powell, CEO of Kraken, bitterly regretted:

3/ This isn’t about aiming high and missing. This is about recklessness, greed, self-interest, hubris, sociopathic behavior that causes a person to risk all the hard-won progress this industry has earned over a decade, for their own personal gain. While already being rich AF.

— Jesse Powell (@jespow) November 10, 2022

“[La situation est dûe] to sociopathic behavior, which causes a person to risk all the painstaking progress this industry has made over a decade, for personal gain.“

This is indeed the consequence that will certainly be the most marked – and the least tangible – of the FTX affair. The crypto industry will certainly have a hard time proving its reliability to regulators now that a giant like FTX has gone down so suddenly.

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Published by Editions Larousse

Sources: FSA, Bloomberg

Journalist at Cryptoast, I fell into the pot of cryptocurrencies a few years ago. I am passionate about the innovative technologies that stem from the blockchain and I like to find the most crispy information to share with you.

Marine Debelloir

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