The Department of Justice and the Securities and Exchange Commission are investigating FTX, a crypto platform that halted withdrawals on Tuesday, according to a new report from the Wall Street Journal. And while the SEC’s investigation has reportedly been going on for “months,” the agency’s scrutiny was expanded just this week following the FTX liquidity crisis, which has sent the entire cryptocurrency market tumbling. The SEC’s investigations concern FTX’s US exchange, FTX.us, and the currencies listed there, according to the Wall Street Journal. The SEC is also considering whether FTX lending products could be considered securities, which would require the company to register them with the SEC. The debate over whether cryptocurrencies are securities or currency has raged for years, with cryptocurrency advocates trying to argue that cryptocurrencies like Bitcoin are currency. If crypto is indeed a currency, that means investors won’t face serious tax implications, just like people aren’t usually taxed for owning US dollars. But if they are securities, as SEC chief Gary Gensler previously argued, then Bitcoin can be regulated like stocks you can buy on an exchange, along with the tax implications of any other security. It’s unclear whether the DOJ investigation has been in the works for some time, though investigators are in contact with the SEC, according to the Wall Street Journal. It is also unclear whether FTX’s sister organization Alameda Research is part of any potential criminal investigation. Alameda Research is backed by at least $4 billion in FTX funds, according to a new Reuters report, after Alameda made some bad bets on things like crypto lender Voyager Digital, which recently filed for bankruptcy. The Justice Department did not respond to a request for comment early Thursday. FTX and Alameda CEO Sam Bankman-Fried hasn’t been seen in a few days, with rumors swirling on social media about where he might be hiding—the Bahamas being a popular rumor on Twitter, though not there is evidence to suggest it has indeed left the continental US But after Binance made a brief gesture to buy the company, only to exit after seeing the books, it’s no surprise that SBF, as it’s often called, might want to lay low for a while. G/O Media may receive a commission lightsaber hum SabersPro For the Star Wars fan with everything. These lightsabers are powered by Neopixels, LED strips running inside the shape of the blade that allow for adjustable colors, interactive sounds, and changing motion effects while dueling. FTX is reportedly trying to get a bailout from Wall Street firms of about $1 billion, though so far it has come up empty-handed. Most of FTX’s legal and compliance teams apparently resigned on Tuesday, according to news agency Semafor, which certainly raises questions about whether FTX will ever be able to get back on its feet. The straw that apparently broke the camel’s back on FTX was a decision by Binance CEO Changpeng Zhao, aka CZ, to sell a massive cache of FTX’s native token, FTT. Zhao bought a 20% stake in FTX in 2019, but Zhao and Bankman-Fried had a falling out in mid-2021 when FTX was trying to get a financial license to operate in Gibraltar, according to Reuters. Regulators had requested financial information from major shareholders, including Zhao, but the Binance CEO apparently did not want to hand over the documents. As a result of Zhao’s failure, Bankman-Fried bought Zhao out for about $2 billion, which included several FTT tokens, according to Reuters. Zhao’s decision to start selling about $580 million of the coin this week, which he announced publicly on Twitter, was when the FTX fan struck. News of the DOJ and SEC investigations comes as the entire cryptocurrency market has plummeted, weighed down by general skepticism about digital counterfeit money and now the problems at FTX. It was just last February when FTX ran commercials during the Super Bowl with a humorously skeptical Larry David. The ads tried to portray crypto skeptics as unduly wary of the industry, failing to see the genius of investing in coins like Bitcoin and Ethereum. In retrospect, Larry David’s character was the smart one. Don’t Miss Crypto: Larry David FTX Commercial Bitcoin is currently trading at around $16,580, down 8% from just 24 hours ago and a two-year low for the cryptocurrency. Bitcoin’s all-time high was exactly one year ago when it was trading at over $69,000. Ethereum, the second most popular cryptocurrency, is currently trading at $1,180, down about 7% from the previous day. FTT, the native token in FTX, is currently trading at just $2.95, down 33% from 24 hours ago and 88% from a week ago. FTT was trading at $60.16 a year ago today. Several other cryptocurrency platforms and coins have collapsed in the past year, including Celsius, which halted withdrawals in June before filing for bankruptcy and reportedly owed users $4 billion. Luna, the cryptocurrency launched by Do Kwon, became worthless in May. Freeway, a UK-based crypto platform that promised returns of up to 43%, also collapsed just last month. What’s next for FTX and will people who put their money into the platform ever see their coins again? Unfortunately no one knows the answer to these questions yet. But every day that goes by without a huge corporate bailout is a bad sign.
