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gary gensler head of the sec

The US Securities and Exchange Commission (SEC) is reportedly launching an investigation to determine if crypto exchanges have implemented proper procedures to prevent insider trading, an exclusive report from Fox Business indicated.

Sources familiar with the matter told the media outlet that a letter has been sent to at least one exchange already although the same person believes that the inquiry will extend to other players as well.

Spokespersons from top exchanges including Crypto.com, Coinbase, Binance, and FTX declined to comment on the report and the same goes for the SEC.

The inquiry would come at a point when valuations within the crypto market appear to be collapsing amid some tectonic shifts in the macroeconomic landscape. Moreover, the inquiry may be responding to pressure from legislators to look into the debacle of Terra – an event that led to the loss of over $40 billion from investors after the price of the project’s native token LUNA and stablecoin UST dropped to near zero.

Your capital is at risk.

Not The First Time Insider Trading Allegations Hit Exchanges

In September last year, Binance was reportedly under investigation by the Commodities Futures Trade Commission (CFTC) for both allowing US citizens to trade derivatives that the company was not permitted to deal with and also amid allegations about insider trading.

Multiple other probes have been launched against the company headed by Changpeng Zhao by the Justice Department (DOJ) and even the Internal Revenue Service (IRS).

The head of the global pure-play crypto exchange stated that his firm has “zero tolerance” for that kind of behavior. The Chief Executive Officers of other renowned exchanges such as FTX’s Sam Bankman-Fried and Coinbase’s Bryan Armstrong uttered the same answer in response to these incidents.

On 21 May, the Wall Street Journal published a report called “Crypto might have an insider trading problem” in which it detailed how multiple crypto wallets bought tokens that were going to be listed on various exchanges before the official announcement was made.

The report cites data from research firm Argus that identifies at least 46 wallets that have profited from similar operations. The proceeds earned from these suspicious activities amounted to at least $1.7 million although the figure could be even higher.

Zhao clarified in a tweet that investigators looked into some of the wallets mentioned in the report and found that they did not belong to a Binance employee.

There’s Already a Precedent for Insider Trading within the Industry

Earlier this month, authorities from the New York Southern District officially charged and arrested a former employee of OpenSea – the popular marketplace for non-fungible tokens (NFTs) – on insider trading.

According to prosecutors, Nathaniel Chastain used confidential information regarding NFTs that were going to be listed on the marketplace for his personal gain. The maximum sentence for the counts of money laundering and wire fraud is 20 years.

Chastain’s duties included selecting which NFTs were featured on the front page of the website. The value of these digital assets was typically boosted once they were moved to that location and that allowed him to profit by buying them beforehand by using privileged information.

Crypto Regulation in the United States is Underway

Legislators within the United States keep working to push forward a regulatory framework for cryptocurrencies and digital assets as a whole that gives agencies more tools to protect consumers from fraudulent schemes.

Just a week ago, Senators Cynthia Lummis and Kirsten Gillibrand presented a bipartisan bill that seeks to clarify the status of digital assets in the eye of the country’s law.

Based on the documents presented by the senators, the bill would classify these assets depending on how they are marketed to the public with the CFTC and the SEC being the agencies in charge of regulating them depending on how they are structured.

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