The recent collapse of crypto exchange FTX has sparked investigations from regulators, lawmakers, and criminal investigators. FTX is based in the Bahamas and was founded in 2019.The exchange grew rapidly and was the third largest global crypto exchange by volume.

In a media article published byReuters, it is implied that FTX boasted that it was the “most regulated” crypto exchange on the planet and actually invited regulators to scrutinise the firm more closely.

According to Reuters, they have access to company documents which contain the tactics used by founder Sam Bankman-Fried to fuel his regulatory agenda. The documents also reveal information about the unreported terms linked to a deal struck with the IEXGroup; a U.S.-based stock trading platform.

The mentioned documents apparently stated that the FTX-founder initially bought a 10% share in IEX but had the option to buy it out over the next couple of years which opened the door for possible lobbying with the U.S. Securities and Exchange Commission and IEX’s regulators regarding crypto regulations.

The Reuters article stated that the documents were indicative of FTX possibly trying to craft a regulatory framework for itself through the acquisition of shares in firms which already comply with regulatory requirements and obtained licences by following the correct procedures. In fact, it seems as if FTX had spent $2 billion on“acquiring regulatory purposes”.

Apparently, the documents also refer to FTX propagating this regulatory status as a competitive advantage to attract capital investments on a large scale by signalling that their regulatory status could give them access to new markets which is beyond the reach of unregulated entities. Reuters indicated that, at the time when this article was published,FTX has not responded to questions or a request to comment.

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Walking the straight and narrow

Should crypto asset firms want to operate in a regulated market, they are bound by rules and regulations which they might perceive as restrictive. They might also be of the opinion that the regulators could overestimate the risk linked to crypto assets. However, regulations serve as the backbone of strong financial systems and the main objective of regulators are to protect the consumers, the firms, shareholders, investors ,and the market itself but this type of protection, in a regulated system, can only be effective, if everyone is part of the system and adhere to the rules.

The Lysis Group has been, and continues to be, successful in assisting clients with complex and contentious regulatory aspects regarding crypto registration and beyond.  Equally important, they also have the capacity and integrated approach to assist crypto asset firms to not only obtain registration from regulators, but to also establish the Financial CrimeFramework needed to remain compliant during their operations.

The article that was published by Reuters can be accessed on the following link: https://www.reuters.com/technology/exclusive-how-ftx-bought-its-way-become-most-regulated-crypto-exchange-2022-11-18/

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