Wednesday, November 29, 2023

SEC Launches Investigation Into Insider Trading On Crypto Exchanges

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The SEC launches investigation into insider trading on Crypto exchanges with at least one receiving a letter from the regulator regarding safeguards on their platform so let’s read more today in our latest cryptocurrency news.

The US SEC launches an investigation into insider trading complaints on crypto exchanges and at least one already got a letter requesting information about safeguards on the platform, as per the report from Fox business that cited a person with direct knowledge of the inquiry. Gary Gensler, the SEC chair expressed concerns about the exchanges offering multiple services like market-making, offering trading venues, and custody which can cause conflicts of interest. He said:

“Crypto’s got a lot of those challenges—of platforms trading ahead of their customers. In fact, they’re trading against their customers often because they’re market-marking against their customers.”

SEC Chair Gensler Claims, SEC Chair Predicted, coins, fail, terra
Gery Gensler

The letter to the exchanges cited by the Fox business was sent after last month’s crash of the Terra UST and LUNA stablecoins. However, it is not yet clear whether the inquiry is being led by the Office of Compliance Inspections and examinations which looks into areas like interest and the SEC enforcement division. If it is being conducted by the latter, this will suggest the regulator is concerned about future violations.

The SEC was active in its scrutiny of the crypto space and most recently, the regulator was reported to be looking into the Terra collapse with the company behind UST and LUNA violating investor protection rules in the way that it marketed the tokens. Reports suggested that federal investigators are looking into violations in the Binance 2017 initial coin offering. The SEC could be set to lose oversight of the sector if this bill passes Senate, aiming to hand over the reign to the Commodity Futures Trading Commission.

Also, Terra’s UST stablecoin could be the subject of a US SEC investigation. An unnamed source told Bloomberg that the SEC starts investigating Terra’s UST crash and they are looking into whether the way Terraform Labs marketed UST, the stablecoin violated federal investor protection rules. By definition, Terra’s UST should have maintained the US dollar peg and made it redeemable for $1 but unlike other stablecoins, UST relied on an algorithm and not the central user to maintain the peg. When the algorithm seemed to be enough, Terraform Labs called the Luna foundation guard and stepped into providing more backing.

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