The Commodity Futures Trading Commission (CFTC) commissioner, Christy Goldsmith Romero, has questioned the diligence of FTX’s Venture Capitals, given that they did not provide any oversight even with the staggering levels of the now-bankrupt exchange’s poor and unskilled management.
Romero’s tough questions
Speaking to Bloomberg, the commissioner raised serious questions regarding the investors’ frame of mind in investing hundreds of millions in a company with a reportedly incompetent leadership like FTX.
Romero explained that she needed to understand how institutional players, who are also experienced investors, would not investigate the company even after writing off millions of dollars in less than 12 months.
The CFTC probe comes after the new FTX CEO, John Ray, revealed in their bankruptcy filings that the company did not keep any financial records. FTX’s bankruptcy filings also showed that the leadership had no control over the company’s financials and hired auditors “no one’s ever heard of.”
Following this revelation, she questioned if the experienced VCs turned a blind eye to the poorly run exchange or if the company’s fictitious promises blurred their vision. Even so, Romero claimed that the false promises made by the then FTX CEO Sam Bankman-Fried violated the trust of its clients.
Need for more regulation
The commissioner added that LedgerX, a unit of FTX that had been registered and was regulated by CFTC, survived the bankruptcy plunge. It exemplifies the need for more regulation within the crypto space.
She emphasized the need for crypto regulations to restore the American people’s trust and confidence. The CFTC would ensure that the crypto markets are clean of such irregularities by combining enforcement and regulatory actions. She revealed that the regulator is examining the crypto market and bringing cases of such nature.
With that, she encouraged congress to address legislation. Earlier, the agency warned against crypto exchanges self-certifying and listing products without any oversight. With laws in place, it would ensure that regulators such as the Securities and Exchange Commission (SEC) can prevent mismanagement within such rogue platforms.