SEC calls FTX case the beginning of crypto industry misconduct proceedings
SEC Chairman Gary Gensler compared cryptocurrencies to casinos and criticized the ways in which digital asset exchanges have recently begun confirming reserves
The Securities and Exchange Commission (SEC) after the collapse of FTX is just beginning to fight cryptocurrency companies that refuse to obey the rules, writes Bloomberg.
According to Gensler, there are fewer and fewer opportunities for companies to register with the SEC in a timely manner. Crypto companies that don't comply are a "casino in the Wild West," the regulator head said.
Gensler did not name specific companies that the SEC is now examining and would not comment on the processes, but he warned of the industry's problems that are of primary concern to the commission.
The SEC has repeatedly stated that most of the tokens in the crypto market are unregistered securities.
Gensler also spoke out about so-called reserve proof reports that some cryptocurrency companies have been publishing lately to prove that they have enough assets to secure customer funds. The SEC chief noted that this practice, used by major cryptocurrency companies, including the Binance exchange, does not meet the disclosure requirements needed to protect investors.
"Confirmation of reserves is not a complete accounting of a company's assets and liabilities and does not satisfy the requirements of the Securities Act to segregate customer funds," Gensler said.
The SEC chief made it clear that regulators are focused on keeping financial records of cryptocurrency companies. He said cryptocurrency companies must follow time-tested rules for holding customer funds and the way they keep their books.
The fact that customer funds are often not properly segregated by cryptocurrency firms drew a lot of attention from the public and regulators after the FTX collapse.
In the lawsuit against Allison and Wang, the SEC also found the FTX exchange's native token to be a security. Court documents say FTT was promoted as an investment vehicle to profit from the development of the FTX exchange.