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SEC Chair Gensler: Rebooted FTX Led by Former NYSE Chief Possible within Legal Framework

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SEC Chair Gensler Stresses Compliance and Enforcement in Crypto Industry

SEC Chair Gary Gensler emphasizes the importance of operating within the law in the crypto industry, specifically referring to the potential revival of FTX under new leadership. Gensler's comments come amid reports that Tom Farley, former president of the New York Stock Exchange, is among the bidders interested in acquiring the bankrupt crypto exchange. Gensler urges industry participants to build investor trust, ensure proper disclosures, and refrain from commingling functions or trading against customers.

Challenges and Regulatory Violations

The trial involving FTX founder Sam Bankman-Fried, who was found guilty on multiple criminal charges including fraud and money laundering, shed light on the problematic relationship between FTX and sister hedge fund Alameda Research. The evidence presented during the trial revealed the extent of their close association, raising concerns about the operation of both an exchange and a prop shop by Bankman-Fried.

Enforcement of Securities Laws

Gensler emphasizes the robustness of existing securities laws and the need for their enforcement in the crypto industry. He asserts that cryptocurrencies are not incompatible with securities laws, but many actors in the industry fail to comply with these established regulations. Gensler points out the international nature of non-compliance, highlighting the importance of adhering to international sanctions and anti-money laundering laws. The SEC and the Commodity Futures Trading Commission have brought civil suits against FTX, separate from the criminal charges. The SEC accused Bankman-Fried of perpetrating a brazen fraud, emphasizing the need for enforcement to ensure market integrity.

Global Compliance and Regulatory Challenges

Gensler draws attention to the regulatory challenges faced by international crypto exchanges such as FTX and Binance. Despite operating internationally, Binance has faced scrutiny from U.S. regulators for allegedly subverting their own controls to allow high-net-worth U.S. investors to trade on its unregulated exchange. Gensler highlights the importance of complying with international sanctions and anti-money laundering laws to prevent nefarious activities in the crypto space.

SEC's Stance and Enforcement Actions

Gensler acknowledges recent interim losses in court cases, including those involving Ripple and Grayscale. However, he emphasizes that the SEC has been active in the crypto space, bringing or settling 150 cases over the past six years. Gensler mentions the ongoing legal dispute with Coinbase, a publicly traded U.S. crypto exchange, which has raised concerns about regulatory constraints. In conclusion, Gensler reiterates the importance of compliance with securities laws in the crypto industry. He emphasizes the need for enforcement to ensure market integrity and protect investors. As the SEC continues its regulatory efforts, companies operating in the crypto space must adhere to the law to maintain trust and credibility in the market.

Implications of SEC's Stance on Compliance for New Crypto Businesses

SEC Chair Gary Gensler's emphasis on lawful operations in the crypto industry provides critical guidance for new businesses in this sector. Gensler's comments, made in light of the potential revival of FTX, underscore the importance of building investor trust, ensuring proper disclosures, and avoiding practices such as commingling functions or trading against customers.

Lessons from Regulatory Violations

The trial of FTX founder Sam Bankman-Fried offers a cautionary tale for new businesses. The evidence of a problematic relationship between FTX and its sister hedge fund, Alameda Research, highlights the risks of operating both an exchange and a prop shop. New businesses should heed these lessons and ensure clear boundaries and transparency in their operations.

Enforcement of Securities Laws in the Crypto Industry

Gensler's emphasis on the robustness of existing securities laws and their enforcement is a clear signal to new businesses in the crypto industry. Compliance with these regulations is not optional, and failure to adhere can lead to serious consequences. New businesses should ensure they fully understand and comply with these laws to avoid potential legal issues.

Global Compliance Challenges and SEC Actions

The regulatory challenges faced by international crypto exchanges such as FTX and Binance highlight the complexities of operating in this global industry. New businesses should be aware of the need for global compliance, particularly with international sanctions and anti-money laundering laws. In essence, Gensler's comments underscore the importance of compliance and enforcement in the crypto industry. As new businesses enter this space, adherence to securities laws and a commitment to transparency and investor trust will be key to their success and credibility in the market.
Story First Published at: https://www.cnbc.com/2023/11/08/secs-gensler-says-rebooted-ftx-is-possible-if-done-within-the-law.html
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