SEC reportedly launches investigation into insider trading on exchanges

SEC reportedly launches investigation into insider trading on exchanges

According to reports, the Securities and Exchange Commission (SEC), has launched an investigation to find out how crypto exchanges work to prevent insider trading.

FOX Business reported that on June 15, a source with direct knowledge about the activities of the SEC stated that the commission had written a letter asking for information regarding how the platform protects its users from insider trading. According to the source, multiple exchanges received the same letter.

Although it is unclear which exchange received the request from the SEC, the news outlet stated that Coinbase, Binance and FTX were all involved in the exchanges. The probe was also not confirmed by the SEC.

It is not clear what the nature of this inquiry is. The SEC could be looking for leads to sue an exchange over potential legal violations via its enforcement division. Or it could simply be a routine compliance inspection through the Office of Compliance Inspection and Examinations.

The SEC has been investigating allegations of insider trading at OpenSea, the largest marketplace for non-fungible tokens (NFTs), in recent weeks. Cointelegraph reported that the SEC could eventually label NFTs securities following charges of insider trading against Nathanial Chastain, OpenSea’s former product manger.

Jeremy Hogan, a partner at Hogan & Hogan said that the SEC may be interested in exchanges because of the claims of insider trading on tokens scheduled to list and likely to experience a price rise. Hogan stated that “it’s this kind of trading that might be the SEC forewarning an exchange they need to take control of.”

The Digital Commodity Exchange Act of 2020 would see the SEC lose its presumptive jurisdiction over crypto-exchanges. The bill, if passed, would give the Commodity Futures Trading Commission’s (CFTC) authority to regulate crypto exchanges and providers of stablecoins.

The SEC may have initiated the investigation because of current market conditions and ongoing scandals within the crypto industry. The Terra ecosystem crashed after the Terra USD stablecoin was depegged, and the LUNA cryptocurrency plummeted 99.9% in its value.

Related: SEC chair warns of ‘too good for be true’ returns in market downturn

Celsius, a decentralized finance staking platform and lending platform Celsius, has been under fire for freezing user withdrawals. Rumours swirl about its insolvency due to large crypto transfers into FTX exchange.

For the first time since February 2021, the total crypto market cap is below $1 trillion. According to CoinGecko, it is down 1.1% in the last 24 hours to $977 Billion.

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