The FTX debacle is echoing through the crypto industry and finance in general.
The collapse of this crypto exchange, which was valued at $32 billion in February, shocked everyone.
FTX filed for Chapter 11 bankruptcy on Nov. 11 because it ran out of money to meet the demands of its panicked customers. And that has prompted regulators to open investigations into the crypto empire of Sam Bankman-Fried, the founder of FTX.
In addition, regulators are increasing their oversight of the crypto space, where transparency is almost non-existent.
The Singapore Market Authority has just announced that it is conducting an investigation into Binance, the largest cryptocurrency exchange in the world by volume. Binance agreed to buy FTX on November 8 and withdrew the offer the following day.
Binance is suspected of violating rules regarding payment services.
“The Commercial Affairs Department has launched an investigation into Binance for possible violation of the Payment Services Act,” the Monetary Authority of Singapore said in a statement Nov. 21.
The regulator disclosed the investigation while responding to questions about whether it was treating Binance.com differently from FTX.
Complaints about Binance
“Although both Binance and FTX are not licensed here, there is a clear difference between them,” the monetary authority argued. “Binance was actively looking for users in Singapore, while FTX did not. Binance even went so far as to offer offers in Singapore dollars.”
The investigation from Singaporean authorities comes as Binance CEO Changpeng Zhao emerges as the new king of cryptocurrencies following the demise of Bankman-Fried.
In particular, Zhao announced the creation of a fund to help crypto companies that would find themselves short of cash due to their exposure to FTX. He still has not provided the details of this fund.
The regulator said it received several complaints about Binance between January and August 2021. There were also announcements in multiple jurisdictions of Binance acquiring unlicensed customers during that period.
“With regard to FTX, there was no evidence that it specifically incited Singaporean users. Transactions on FTX could also not be conducted in Singapore dollars. However, as in the case of thousands of other financial and crypto entities operating abroad, Singaporean users to access FTX services online.”
The monetary authority accused Binance of recruiting Singaporean users without a license.
It said Binance should stop recruiting Singaporean users. As a result, the company has taken several measures, including the geo-blocking of Singaporean IP addresses and the removal of its mobile application from Singapore app stores.
“These measures were intended to demonstrate conclusively that Binance had stopped recruiting and offering services to Singaporean users. Should Binance now decide to lift some of these restrictions, it must continue to abide by the ban on Singaporean users without acquiring a license.”
Binance declined to comment. “Due to confidentiality obligations, we are unable to comment on this,” a spokesperson told TheStreet.
The research is not specific to FTX, but it illustrates the pressure that regulators are putting on the crypto sector as scandals multiply, causing huge losses for private investors and large investors alike.
Last May, sister cryptocurrencies Luna and UST, or TerraUSD, collapsed, wiping out at least $55 billion. That defeat sparked a credit crunch that led to the liquidation of the hedge fund Three Arrows Capital, or 3AC, and the bankruptcy of cryptocurrency lenders Celsius Network and Voyager Digital, among others.
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