‘Beware’ of investing in crypto or risk ending up in bankruptcy court, SEC chairman warns



The head of the Securities and Exchange Commission warned Americans of the risks of investing in the loosely regulated cryptocurrency industry on Thursday, a stark warning as one of the biggest crypto exchanges FTX crashes. ignite.


When you give a crypto exchange your holdings “and they go down, you’re just going to be lining up in bankruptcy court,” SEC Chairman Gary Gensler told CNBC’s Squawk Box on Thursday morning.

Gensler declined to name specific exchanges, but his request comes just days after FTX collapsed after it was unable to meet billions of dollars in withdrawal requests.

The reference to bankruptcy court is a grim allusion to the fact that FTX users are not guaranteed to review their holdings: crypto exchanges are not regulated like institutions like FDIC-insured banks are, and consumers are not are not sure of their assets.

After rival exchange Binance pulled out of its FTX bailout deal, it’s unclear how individuals might see their money back save legal action, as Gensler hinted.

The SEC, Department of Justice and Commodity Futures Trading Commission are each investigating how FTX handled consumer funds before the liquidity crisis, according to multiple news outlets.

Key context

FTX’s fall from grace happened in a matter of days, with the exchange seeing a series of pullbacks earlier this week after Binance CEO Changpeng Zhao raised concerns about its rival’s insolvency issues. Binance struck a deal to acquire FTX on Tuesday before bailing out a day later, explaining that “liquidity issues are beyond our control or our ability to help.” Former industry titan FTX has dragged the rest of the crypto market down with it, sending the biggest coins, bitcoin and ether, down 18% and 21% this week, respectively, while Coinbase shares have dropped by 23%.

crucial quote

When reached by text by Forbes On his removal from our billionaires list, Bankman-Fried made his first public comment since Binance’s deal went haywire: “Hey, not entirely clear but certainly can’t dispute with confidence, will update later if new information comes out…”

Chief Spokesperson

“It’s incredibly frustrating that we basically have a situation that looks like Theranos,” Galaxy Digital CEO Michael Novogratz told CNBC on Thursday, referring to the infamous multibillion-dollar biotech company founded by Elizabeth Holmes. , which later turned out to be fraudulent. Novogratz’s company held $77 million in assets at FTX, money the investor said he wasn’t sure he’d ever see again.

Further reading

Binance Backs Down From FTX Acquisition – Here’s What Led To The FTX Crypto Crash (Forbes)


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