The U.S. Securities and Exchange Commission (SEC) has charged Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, with orchestrating a “scheme to defraud equity investors” in the collapsed cryptocurrency exchange.

Cryptocurrency platforms applying for registration in Canada will now have to agree to tighter rules, including a ban on margin and leverage trading. Firms will also have to hold the assets of their clients separately from their proprietary business.

The founder and CEO of leading cryptocurrency exchange Binance, Changpeng Zhao, has welcomed the “stress test” the platform is enduring as users move to withdraw their funds from the platform.

Top stories in the Crypto Roundup today:

• SEC Charges Sam Bankman-Fried With Defrauding FTX Investors
• Canada to Ban Crypto Leveraged Trading
• Binance Welcomes ‘Stress Test’ As Withdrawals Top $3 Billion
• BTC Netflows Record Largest Outflows from Exchanges

 

SEC Charges Sam Bankman-Fried With Defrauding FTX Investors

The U.S. Securities and Exchange Commission (SEC) has charged Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, with orchestrating a “scheme to defraud equity investors” in the collapsed cryptocurrency exchange.

On Monday night, Bankman-Fried was arrested at his home in the Bahamas. He has been charged with misleading large investors who committed nearly $2 billion to the exchange in recent years, regarding the financial health of the trading platform and its sister crypto trading platform Alameda Research.

The SEC said that in his representations to investors, Bankman-Fried promoted FTX as a “safe, responsible crypto asset trading platform,” and specifically touted its “sophisticated, automated risk measures to protect customer assets.”

In reality, the complaint alleges, FTX’s founder “orchestrated a years-long fraud to conceal from FTX’s investors the undisclosed diversion of FTX customers’ funds to Alameda Research” and the “undisclosed special treatment afforded to Alameda on the FTX platform.”

That special treatment included a virtually unlimited line of credit funded by FTX’s customers and exempting the trading firm from key risk mitigation measures.

FTX did not disclose its exposure to Alameda’s “significant holdings of overvalued, illiquid assets such as FTX-affiliated tokens.”

The SEC’s complaint also alleges Bankman-Fried used comingled user funds at Alameda to make “undisclosed venture investments, lavish real estate purchases, and large political donations.”

Canada to Ban Crypto Leveraged Trading

Cryptocurrency platforms applying for registration in Canada will now have to agree to tighter rules, including a ban on margin and leverage trading. Firms will also have to hold the assets of their clients separately from their proprietary business.

According to terms outlined by the Canadian Securities Administrators (CSA), in light of “recent events in the crypto market,” businesses that need to submit a pre-registration undertaking (PRU) will have to commit to an enlarged set of rules and requirements.

In August, crypto businesses were informed that they need to submit a pre-registration undertaking in order to continue operating while pursuing full registration, with a deadline for submitting PURs not yet announced.

The CSA said:

“Crypto trading platforms giving these undertakings agree to comply with expanded terms and conditions that will include, among other things, requirements to hold Canadian clients’ assets with an appropriate custodian and segregate these assets from the platform’s proprietary business, as well as a prohibition on offering margin or leverage for any Canadian client.”

The regulator reiterated that it sees digital assets as highly speculative, high-risk investments, with risks that could result from various factors including “crypto trading platform non-compliance with registration terms and conditions or undertakings, interconnectedness within the crypto sector, insolvency, hacks, price volatility, and uncertain value propositions for individual assets.”

Binance Welcomes ‘Stress Test’ AsWithdrawals Top $3 Billion

The founder and CEO of leading cryptocurrency exchange Binance, Changpeng Zhao, has welcomed the “stress test” the platform is enduring as users move to withdraw their funds from the platform.

Per Zhao, it’s “business as usual” for the exchange, which often has net withdrawals as well as net deposits. Surging outflows have forced the trading platform to temporarily halt USDC withdrawals, adding to speculation and anxiety surrounding the platform.

Binance has since reopened USDC withdrawals, and characterized the pause as a result of a swap transfer between Paxos-issued BUSD and USDC that needed U.S. banks to be open.

Binance has recorded over $3 billion in outflows over the last 24 hours after the exchange was  criticized for only showing “part” of its assets and liabilities in a proof-of-reserves and proof-of-liabilities verification report released over the past week, conducted by accounting firm Mazars’ South African affiliate.

Notably, Nansen data shows Binance still has over $52 billion worth of digital assets in its wallets, with over 50% being in BUSD, USDT, and BTC.

BTC Netflows Record Largest Outflows from Exchanges

After the collapse of FTX on November 8, centralized exchanges have experienced a series of outflows as investors become concerned about the safety of their deposits on these platforms. In November, BTC Netflows recorded the largest negative flow from CEXs in its history, with a netflow of -91,363 BTC, worth over $1.6 billion.

Read more on CryptoCompare’s latest Exchange Review.

State of the Crypto by Top Tier Exchange Volume

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