SEC Investigating FTX Investors’ Due Diligence: Reuters

The securities regulator is looking at whether financiers did their homework before investing in a crypto exchange that has since been accused of sloppy governance.

AccessTimeIconJan 6, 2023 at 12:07 p.m. UTC
Updated Jan 9, 2023 at 5:57 p.m. UTC

The U.S. Securities and Exchange Commission (SEC) is examining whether investors in bankrupt crypto exchange FTX correctly followed due diligence procedures, Reuters reported on Thursday, citing two people familiar with the inquiry.

In December, the SEC charged former FTX chief Sam Bankman-Fried with scheming to defraud equity investors who stumped up over $1.8 billion for the company – but is also probing whether those companies did their homework to ensure the investment was sound, the report said.

The report did not name which companies were under investigation, and the probe does not indicate wrongdoing but will focus on whether the companies fulfilled their fiduciary duty to their own investors, Reuters said.

The collapse of FTX, which filed for Chapter 11 bankruptcy protection 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.

The battle to wind the company up has also led to a multiple legal claims over who actually owns various assets, including luxury Bahamas properties and $450 million in Robinhood shares. New FTX Chief Executive Officer John Ray has said governance and record-keeping at the company was the worst he ever saw in his 40-year career.


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Jack Schickler

Jack Schickler was a CoinDesk reporter focused on crypto regulations, based in Brussels, Belgium. He doesn’t own any crypto.