Federal prosecutors are investigating the cause of FTX’s collapse and what happened to lost client funds
The stunning collapse of cryptocurrency platform FTX is being investigated by federal prosecutors in Manhattan, people familiar with the investigation said.
The US Attorney’s Office for the Southern District of New York is investigating the circumstances of FTX’s sinking, the people said, asking not to be identified because the investigation was not publicly announced.
FTX’s sudden implosion with $9 billion in liabilities and just $900 million in assets on the balance sheet sent the crypto market into a tailspin last week. The platform filed for bankruptcy on Friday along with 130 companies affiliated with the company, including FTX affiliates FTX.US and trading firm Alameda Research.
Regulators and investigators will try to figure out how one of the world’s largest stock exchanges collapsed so quickly, including how client funds are handled, the relationship between subsidiaries and oversight. By the time the market peaked in 2021, FTX had gained the trust of more than 5 million users worldwide and traded more than $700 billion worth of crypto that year alone.
Co-founder Sam Bankman-Fried was also questioned by Bahamian police and regulators on Saturday, a person familiar with the matter told Bloomberg, while the country’s authorities investigate whether there was criminal misconduct in FTX’s collapse. The company is registered in the Bahamas.
Bankman-Fried’s fortune, which hovered around $16 billion earlier this week, has dwindled, as has the reputation of a crypto prodigy who until recently was seen as the savior of much of the industry.
FTX’s US General Counsel did not immediately respond to a request for comment.
The SEC is reviewing FTX, its American arm FTX.US and Bankman-Fried’s trading house Alameda Research for potential security breaches, Bloomberg reported last week.
The regulator was investigating the crypto empire even before its demise.
While SDNY can prosecute criminal violations and the SEC focuses on civil enforcement, agencies are known to conduct parallel investigations.
A spokesman for SDNY declined to comment.
SDNY has spearheaded some of the highest-profile cryptocurrency investigations in recent years, including the alleged insider trading case involving a former Coinbase employee and the prosecution of those behind the bogus crypto empire OneCoin.
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