Mark Cuban is not happy and makes it known.
Successful entrepreneurs seem, like most business circles, to have been shocked by the implosion, in less than a week, of FTX, one of the big players in the crypto sphere.
The cryptocurrency exchange filed for Chapter 11 bankruptcy on November 11, after three turbulent days, which saw a company valued at $32 billion in February urgently calling on its rivals for help.
But FTX’s financial situation was too dire for potential rescuers to attempt to save it. Binance, the largest crypto exchange and a big rival of FTX, tried but in the end give up.
“As a result of the company’s due diligence, as well as recent news reports about mishandled customer funds and alleged investigations by US agencies, we have decided that we will not pursue the potential acquisition of http://FTX.com,” said Binance on November 9.
“Initially, we hope to be able to support FTX customers to provide liquiditybut the problem is beyond our control or ability to help.”
FTX’s Controversial Practice
As a crypto exchange, FTX executed orders for their clients, took their cash and bought crypto currencies on their behalf. FTX acts as a custodian, holding the client’s crypto currency.
FTX then uses its clients’ crypto assets, through its sister company’s Alameda Research trading arm, to make money by borrowing or making markets. The borrowed FTX cash is used to bail out other crypto institutions in the summer of 2022.
Once this exposure became known, clients, fearing the collapse of FTX, rushed to liquidate their crypto positions and get their money. On November 6, customers withdrew a record $5 billion. It runs on the exchange. This leads to the insolvency of FTX, because it does not have crypto assets, currently borrowed or sold, to honor its client’s sell orders.
Panic caused cryptocurrency prices to plummet. Shares of crypto companies like Coinbase (coin)- Get a Free ReportMicroStrategy (sTR)- Get a Free Report and Robinhood (crippled)- Get a Free Report sold by investors, who fear the contagion effect. The question now is which companies will be affected.
The search for responsibility has also begun, trying to understand how a company of this size can implode, without the regulator aware of the risk, especially since its former Chief Executive Officer, Sam Bankman-Fried, is whispering in the ears of this regulator and politicians to determine what regulation will be adequate for the sector.
Where is the SEC?
Mark Cuban, who has invested in several firms and projects related to cryptocurrency, believes that the regulator has not done their job. He targeted the US Securities and Exchange Commission (SEC) in particular.
For a billionaire, contrary to what we say, the crypto industry is regulated. It just so happened that the SEC failed in its role. Here’s what he had to say on Twitter.
“Everyone who says that crypto is unregulated,” said the shark tank star on Twitter on November 12. “It’s not true. The SEC says that they regulate crypto. Ask Kim Kardashian and the tokens they have sued or settled with.”
He continued: “The question is, looking at the exchanges, why hasn’t the SEC been knocking on the door?”
FTX is a centralized exchange.
The owner of the Dallas Mavericks refers to the sanctions and fines imposed on cryptocurrencies or projects by the SEC. For him, if the SEC sees fit to punish Kim Kardashian for promoting scam coins, it clearly means that the federal agency regulates the sector. Part of the responsibility for the FTX debacle therefore lies with them.
A week ago, the SEC billed Kardashian for promoting on the social network a cryptocurrency that turned out to be a scam. The reality-TV star agreed to pay a $1.26 million fine to settle the investigation.
The crypto industry is particularly suspicious of the regulatory agency, accusing it of deliberately refusing to enact clear rules. The federal agency prefers regulation by enforcement, crypto players criticize.
Contacted by TheStreet, the SEC did not immediately respond.
“I think that investors need better protection in this space. But I will say this, this is a field that is significantly non-compliant,” said SEC Chair Gary Gensler. CNBC on November 10. “But this has regulations and their regulations are often very clear and we have several paths.”
“And one line is working with those crypto exchanges, crypto lending platforms, and to register them properly and why it’s important is so that the public is protected. But we have another line which is enforcement. the team now in the SEC is at least 100 actions in this case and we has been very clear in these various enforcement actions and we have had major victories.
The SEC, Commodity Futures Trading Commission (CFTC) and the Department of Justice (DoJ) have opened investigations into FTX. Regulators under pressure from lawmakers.
Senator Elizabeth Warren called for “more aggressive enforcement” of consumer protection laws.