Home CryptocurrencyAltcoin FTX VCs Subject to ‘Serious Due Diligence Questions’ – CFTC Commissioner

FTX VCs Subject to ‘Serious Due Diligence Questions’ – CFTC Commissioner

by SuperiorInvest

Amid ongoing investigations surrounding defunct crypto exchange FTX, the Commodity Futures Trading Commission (CFTC) is questioning the due diligence performed by institutional investors and their responsibility for the loss of users’ funds.

CFTC Commissioner Christy Goldsmith Romero said the venture companies, which had to write down their multimillion-dollar investments to near zero, raise “serious questions” about the due diligence done over the past year. speaking to Bloomberg.

CFTC Commissioner Christy Goldsmith Romero questions VCs who once backed FTX. Source: Bloomberg

She expressed concern over FTX CEO John Ray’s revelation in court that he had no records and no control over the exchange’s finances.

The lack of record keeping, along with an “auditor no one has ever heard of,” has the CFTC asking questions about the mindset of institutional investors. In this regard, Romero raised a number of questions:

“How is that possible? So they’re turning a blind eye to it? Were they just distracted by this promise of innovation?

Founder of FTX and former CEO Sam Bankman-Fried used trust as a marketing technique to gain the trust of investors. However, Romero echoed current investor sentiment, stating that “now we know that’s not true.”

As a result, she believed the VCs backing FTX ignored red flags when it came to due diligence, further casting doubt on their involvement.

“So were there any conflicts that prevented them (the VC backers) from really paying attention to due diligence and the facts that they were uncovering?” Romero asked closing the current topic.

Related: According to observers, the FTX reboot could slow down due to long-term eroded user confidence

Shark Tank star and investor Kevin O’Leary, who once backed FTX, warned of the potential downfall of unregulated crypto exchanges. He stated:

“If you ask me, will there be another crash to zero? Absolutely. 100% it will happen and it will happen again and again and again.’

As previously reported by Cointelegraph based on a report by the National Bureau of Economic Research, up to 70% of the trading volume on unregulated exchanges is wash trading.

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