SEC launches insider trading inquiry into crypto exchanges

The U.S. Securities and Exchange Commission has launched a sweeping inquiry into whether crypto exchanges have proper safeguards to prevent insider trading on their platforms, FOX Business has learned.

According to a person with direct knowledge of the inquiry, the SEC has sent a letter to one major crypto exchange requesting information about how the platform protects users from insider trading facilitated through its network, but, this person believes the inquiry covers other exchanges as well.

The letter was sent following last month’s collapse of Terra’s UST stablecoin and governance token LUNA, when around $40 billion of investor wealth was wiped out. It’s unclear if other letters have been issued, but the person with direct knowledge said based on conversation with industry insiders the investigation is wide-ranging.

The SEC declined to comment. Press officials from the two biggest crypto exchanges, Binance and Coinbase declined comment. Press officials from FTX and did not respond to numerous requests for comment.

It could not be determined if the inquiry is being led by the SEC’s enforcement division or Office of Compliance Inspections and Examinations, which often conducts preliminary examinations of areas of regulatory interest. An inquiry by the enforcement division would signal the SEC is worried about potentially serious regulatory violations.

The move comes amid yet another massive upheaval in crypto and greater scrutiny by regulators over the nascent market. In recent weeks, the crypto market has been in meltdown mode; the price of Bitcoin — the most popular digital coin — lost nearly a third of its value in the past week and is down 70% from its November all-time high.

Source: FOX

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