- FTX is facing down federal probes, which began months ago, into how it handled client funds, sources told Bloomberg.
- Both the Securities and Exchange Commission and the Commodity Futures Trading Commission are looking into the trading platform.
FTX is facing federal probes into how it handled client funds, while its deal to be acquired by rival Binance looks increasingly doubtful as financials reveal a potentially massive gap.
Both the Securities and Exchange Commission and the Commodity Futures Trading Commission are investigating FTX.com, and the scope covers its ties to other sectors of founder Sam Bankman-Fried's empire, sources told Bloomberg.
The inquiries began months ago, initially focused on FTX US and its crypto-lending activities, but are related to the liquidity crisis that preceded FTX seeking a takeover from Binance, according to Bloomberg. Regulators are also looking into FTX's relationship with Bankman-Fried's trading house Alameda Research.
CoinDesk previously reported that Alameda Research, the trading arm of SBF's empire, carried large swathes of illiquid crypto on its balance sheet.
Meanwhile, Binance is highly unlikely to move forward with its proposed acquisition of FTX amid solvency worries, Coindesk reported Wednesday.
Bloomberg reported separately that Binance executives looking into FTX's financials found a massive gap between liabilities and assets that could exceed $6 billion.
Binance signed a non-binding letter of intent for FTX on Tuesday, and CEO Changpeng Zhao said the company's deal must clear due diligence.
A spokesperson for FTX didn't immediately respond to a request for comment.
FTX is the latest crypto firm to face its reckoning in 2022, following suit of other peers like Three Arrows Capital earlier this year that occurred in conjunction with major cryptocurrencies like bitcoin and ether losing billions in market value.