According to the recent reports, the United States Securities and Exchange Commission (SEC) has launched a probe to investigate what crypto exchanges are doing to prevent insider trading.
FOX Business recently reported that a person with direct knowledge of the matter revealed that the regulatory body had sent a letter to several major crypto exchange platforms requesting information about how they protect users from insider trading. Though there is no clarity on which exchanges have received such a letter, the news outlet said that Binance, Coinbase, FTX, and Crypto.com have declined to comment on the matter. Moreover, the SEC has also declined to confirm such a move. The nature of the investigation is also unclear.
It is reportedly said that the SEC might be seeking out leads to litigate against an exchange’s potential incompliance via the enforcement division. It could also be a simple routine compliance check via the Office of Compliance Inspection and Examinations.
Previous instances of insider trading
In recent weeks, the biggest NFT marketplace, OpenSea, faced allegations from the SEC about insider trading. As TheCoinRise reported, the former Head of Product at OpenSea, Nathaniel Chastain, was indicted with insider trading charges in early June. However, the marketplace has now introduced a new fraud prevention mechanism.
According to Jeremy Hogan, a partner at the Hogan & Hogan law firm, the SEC’s recent interest in exchanges could originate from charges of insider trading on tokens that were planned for listing and were expected to see a price increase.
“It’s that sort of trading that the SEC might be forewarning the exchange they need to get control of,” Hogan said.
The SEC’s presumed jurisdiction over crypto exchanges would be revoked under the proposed Digital Commodity Exchange Act of 2022. The law would grant the Commodity Futures Trading Commission (CFTC) control over crypto exchanges and stablecoin providers if it were to pass.
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