Sam Bankman-Fried.

 
Investors are asking if the FTX implosion could’ve been prevented with tighter regulation. 
The answer isn’t clear cut but Washington holds a responsibility to protect investors, experts say. 
Oversight over the crypto space has long been in a fragmented state. 

The implosion of the FTX cryptocurrency exchange has left observers wondering if tighter regulations could have headed off the eventual collapse of Sam Bankman-Fried’s empire, which may leave up to 1 million of its creditors exposed to losses.

Legal experts told Insider the answer is murky, but Washington has a responsibility to shore up oversight aimed at protecting investors. A potential class-action lawsuit alleged that Bankman-Fried and a slate of celebrity FTX endorsers were encouraged to invest in “what was ultimately a Ponzi scheme.” No criminal charges or formal allegations of criminal wrongdoing related to the FTX breakdown have been filed by authorities. 

With that said, some big questions have come up about the present and future state of crypto oversight, who’s running the show, and whether it is even possible to sufficiently regulate the market.

Here are some of the biggest:

So, who’s even in charge of crypto regulation to begin with?

Oversight is fragmented, without a comprehensive strategy even after the Biden administration earlier this year ordered federal agencies to craft a unified approach to regulation. 

“The government itself has as much difficulty as ordinary leaders do of understanding what cryptocurrency is and … depending on which definition prevails, you have different regulatory schemes that can be enacted, each of them with different consequences,” Gerard Filitti, senior counsel at The Lawfare Project, an international non-profit legal think tank and litigation fund based in New York City, told Insider. 

“You have the SEC which considers crypto to be a security. You have the Commodity Futures Trading Commission which sees it as a commodity, and you have the Treasury Department which calls it a currency,” he said. “So until the government agrees to what cryptocurrency is, it’s very difficult to put in any meaningful regulation that makes sense,” said Filitti.  

The crew cleaning up the mess at FTX said they have found, among other things, software that concealed the misuse of customer funds and a lack of appropriate security controls or record keeping. The bankruptcy cleanup is led by FTX’s new CEO John Ray III, who oversaw Enron’s bankruptcy. 

“If FTX had been a regulated entity under our regulatory umbrella, customer bonds would’ve been protected, there …read more

Source:: Business Insider

      

Everyone is wondering if better regulation could have prevented FTX’s collapse. The answer is both yes and no.

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