US SEC Targets FTX Investors, Questions Their Due Diligence

The U.S. Securities and Exchange Commission (SEC) is launching a probe into the details of the FTX investors due diligence, according to a report by Reuters.

The SEC has already charged the former CEO of FTX, Sam Bnakman-Fried. SBF was arrested in the Bahamas and later extradited to the U.S. He pleaded non-guilty in court last Tuesday. On contrary, FTX’s former Chief Technology Officer Gary Wang, and former Chief Executive of Alameda research, Caroline Wilson, have pleaded guilty.

SEC to not spare FTX investors?

The SEC is now inquiring the firms about their diligence policies and protocols. Also, if they followed them while investing in the collapsed crypto exchange FTX. However, these inquiries do not clear if there are wrongdoings from these financial institutions. Nevertheless, as per the report, these firms might face the regulatory heat although they might have fallen for SBF’s alleged scheme. The point to consider here will be if they followed the diligence policies of the company and investors.

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U.S. authorities requested documents from FTX investors and potential investors in order to learn more about their interactions with company managers, according to reports from various media outlets. Since, 2019, FTX had raised 1.9 billion USD from the equity investors in the firm till it filed for bankruptcy.

These enquiries were made before the SEC charged Sam Bankman-Fried, the founder of FTX, with scamming these investors last month. After the SEC filed those allegations, the agency continued to question investors, but it has since moved its attention to the firms’ due diligence, according to the report.

FTX Fiasco

Once, a billion-dollar company and leading exchange, FTX filed for bankruptcy in the U.S. on 11 November 2022. SBF has been slammed with 8 different financial crimes, mainly around fraud, and is currently going through trails. If proven guilty, can face up to 100 years of imprisonment.

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