FTX Collapse: Binance, Largest Crypto Exchange, Is Under Investigation


The FTX debacle is reverberating through the crypto industry and finance in general.

The collapse of this crypto exchange, which in February was valued at $32 billion, shocked everyone.

FTX filed for Chapter 11 bankruptcy on Nov. 11 because it ran out of cash to meet the demands of its panicked customers. And that has prompted regulators to open investigations into the crypto empire of Sam Bankman-Fried, the founder of FTX.

In addition, regulators are increasing their scrutiny of the crypto space, where transparency is almost nonexistent.

The Singapore market authority has just announced that it is conducting an investigation into Binance, the world's largest cryptocurrency exchange by volume. Binance on Nov. 8 agreed to buy FTX, then retracted its offer the following day.

Binance is suspected of violating rules related to payment services.

"The Commercial Affairs Department commenced investigation into Binance for possible contravention of the Payment Services Act," the Monetary Authority of Singapore said on Nov. 21 in a statement.

The regulator disclosed the investigation while it was responding to questions about whether it was treating differently from FTX.

Complaints About Binance

"While both Binance and FTX are not licensed here, there is a clear difference between the two," the monetary authority argued. "Binance was actively soliciting users in Singapore while FTX was not. Binance in fact went to the extent of offering listings in Singapore dollars."

The Singaporean authorities' investigation comes as Changpeng Zhao, the CEO of Binance, is emerging as the new king of cryptocurrencies after the downfall of Bankman-Fried.

Zhao notably announced the creation of a fund to help crypto companies that were going to find themselves short of cash because of their exposure to FTX. He has still not provided the details of this fund.

The regulator said it received several complaints about Binance between January and August 2021. There were also announcements in multiple jurisdictions of unlicensed solicitation of customers by Binance during that period.

"With regard to FTX, there was no evidence that it was soliciting Singapore users specifically. Trades on FTX also could not be transacted in Singapore dollars. But as in the case of thousands of other financial and crypto entities that operate overseas, Singapore users were able to access FTX services online."

The monetary authority accused Binance to have solicited Singapore users without a licence.

Binance Cites Confidentiality

It said that it required Binance to stop soliciting Singapore users. As a result, the company put in place various measures including geo-blocking of Singapore IP addresses and the removal of its mobile application from Singapore app stores.

"These measures were intended to demonstrate beyond doubt that Binance had ceased soliciting and providing services to Singapore users. Should Binance decide now to dismantle some of these restrictions, it has to continue to comply with the prohibition against soliciting Singapore users without a license."

Binance declined to comment. "Due to confidentiality obligations, we are unable to comment on this," a spokesperson told TheStreet.

The investigation is not related particularly to FTX, but it illustrates the pressure that regulators are putting on the crypto sector as scandals multiply, causing colossal losses to retail investors and large investors.

Last May, sister cryptocurrencies Luna and UST, or TerraUSD, collapsed, wiping out at least $55 billion. That rout caused a credit crunch that lead to the liquidation of the hedge fund Three Arrows Capital, or 3AC, and the bankruptcy of the crypto lenders Celsius Network and Voyager Digital among others.

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