FTX VCs liable to ‘serious questions’ around due diligence — CFTC Commissioner

Amid ongoing investigations astir the defunct crypto speech FTX, the Commodity Futures Trading Commission (CFTC) questions the owed diligence conducted by organization investors and their accountability regarding the nonaccomplishment of users’ funds.

CFTC Commissioner Christy Goldsmith Romero stated that VCs that had to constitute down their investments successful millions of dollars to astir zero raises “serious questions” astir the owed diligence conducted implicit the past year, speaking to Bloomberg.

CFTC Commissioner Christy Goldsmith Romero questioning the VCs that erstwhile backed FTX. Source: Bloomberg

She raised concerns astir FTX CEO John Ray’s revelations successful tribunal astir not having immoderate records and controls implicit the exchange’s financials.

— SBF (@SBF_FTX) January 19, 2023

The deficiency of recordkeeping coupled with “an auditor nary one’s ever heard of” forces the CFTC to inquire questions astir the mindset of the organization investors. In this regard, Romero asked a bid of questions:

“How is that possible? So bash they crook a unsighted oculus to it? Were they conscionable distracted by this committedness of innovation?”

FTX laminitis and erstwhile CEO Sam Bankman-Fried utilized spot arsenic a selling method to summation capitalist confidence. However, Romero echoed the existent capitalist sentiment portion stating that “We cognize present that that's not true.”

As a result, she believed that the VCs backing FTX ignored the reddish flags erstwhile it came to owed diligence, further questioning their involvement.

“So was determination immoderate conflicts that prevented them (VC backers) from truly paying attraction to the owed diligence and the facts that they were uncovering?” asked Romero portion concluding the taxable astatine hand.

Related: FTX reboot could falter owed to long-broken idiosyncratic trust, accidental observers

Shark Tank prima and capitalist Kevin O’Leary, who erstwhile supported FTX, warned against the imaginable autumn of unregulated crypto exchanges. He stated:

“If you’re asking maine if there’s going to beryllium different meltdown to zero? Absolutely. One 100 percent it’ll happen, and it’ll support happening over, and implicit and implicit again.”

As Cointelegraph antecedently reported, based connected a study by the National Bureau of Economic Research, up to 70% of the trading measurement connected unregulated exchanges is lavation trading.