U.S. authorities probe FTX collapse, executives’ involvement -sources

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FILE PHOTO: Illustration shows FTX logo

By Chris Prentice

(Reuters) -U.S. prosecutors in New York are probing FTX’s collapse, a source with knowledge of the investigations said, after the crypto exchange filed for bankruptcy protection last week following a rush of customer withdrawals.

The Justice Department, Securities and Exchange Commission and Commodity Futures Trading Commission are now all investigating how FTX handled customer funds as Alameda Research, the proprietary trading firm of FTX Chief Executive Sam Bankman-Fried, unraveled, the source said. FTX had been confronted with an apparent liquidity crunch after using customer funds to prop up Alameda.

The SEC’s probe also targets FTX executives in the firm’s handling of customer funds and any potential breaking of securities laws, a second source said.

The U.S. Attorney’s Office in Manhattan, the SEC and the CFTC declined to comment.

FTX did not immediately respond to a request for comment.

FTX’s bankruptcy followed a failed rescue deal with rival exchange Binance, with FTX now facing scrutiny from U.S. regulators over its handling of customer funds, as well as its crypto-lending activities.

Reuters reported last week that at least $1 billion of customer funds have vanished from FTX, citing sources.

FTX’s demise marks the latest turmoil for the cryptocurrency industry this year. The overall crypto market has slumped amid a string of meltdowns that have taken down other key players including Voyager Digital and Celsius Network.

(Reporting by Chris Prentice in Washington and Mehnaz Yasmin in BengaluruAdditional reporting by Karen Freifeld in New YorkEditing by Arun Koyyur and Matthew Lewis)

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