Numerous individuals within the cryptocurrency community have observed that the Securities and Exchange Commission (SEC) has taken legal action against all major players except FTX. The Chair of the U.S. SEC, Gary Gensler, has hinted at similarities between crypto exchange Binance and the now-defunct exchange, specifically in relation to their purported utilization of affiliated companies to facilitate fund transfers.
During an interview with Bloomberg on June 6, Gensler highlighted allegations of fraud and manipulation associated with FTX’s sister company, Alameda Research, and the alleged involvement of its founder, Sam Bankman-Fried.
He stated that there is a specific business model that combines and mixes functions, which are not typically observed or permitted in the financial industry.
On June 5, the SEC lodged a legal complaint against Binance, encompassing a total of 13 charges. One of the allegations mentioned in the lawsuit asserts that funds from Binance and Binance.US were mixed together and placed in an account controlled by Merit Peak Limited, an entity associated with Changpeng Zhao.
Additionally, another accusation suggests that Binance.US was involved in wash trading, specifically through its undisclosed main trading firm named Sigma Chain, which is owned by Changpeng Zhao.
Gensler remarked, “Entrepreneurs across various platforms are continuously attempting to generate profits for themselves and their investors by means of affiliated entities, such as hedge funds, engaging in trading activities against their own customers.”
FTX: Lawsuits Everywhere, Except Here?
The recent interview is expected to intensify the ongoing Twitter debate surrounding the question of why the SEC has not filed a lawsuit against FTX.
In a tweet on June 6, Ripple CEO Brad Garlinghouse expressed his belief that the recent series of lawsuits filed by the SEC is an effort to divert attention away from what he referred to as the agency’s “FTX debacle.”
Some individuals speculated that FTX’s significant donations to political parties and the past lobbying activities of its founder, Sam Bankman-Fried, in Washington D.C. could potentially play a role in the SEC’s decision-making process.
In contrast, Markus Thielen, the head of research and strategy at Matrixport and the author of Crypto Titans, presented a different viewpoint on the matter. During an interview with Cointelegraph, Thielen explained that prior to the emergence of FTX, the crypto industry was not perceived as a significant threat to the stability of the U.S. financial system.
However, the recent downfall of three major banks has demonstrated otherwise, according to Thielen. He stated, “Initially, it wasn’t a priority to address or halt the growth of the crypto infrastructure. People only realized after FTX that it involves billions of dollars.”
Thielen also believes that there is a sense of “embarrassment” among those, including lawmakers, who failed to anticipate the issues associated with FTX. One could argue that individuals involved may experience a certain level of embarrassment, leading them to put in extra effort to distance themselves from the situation.
It is important to highlight that although the SEC has not filed a lawsuit against the FTX exchange as a whole, charges have been brought against its founders and former executives. This includes Sam Bankman-Fried, the former CEO of FTX; Caroline Ellison, the former CEO of Alameda Research; Gary Wang, a former co-founder of FTX; and Nishad Singh, the former Director of Engineering at FTX.