The US securities market watchdog has launched an investigation to ascertain if cryptocurrency exchanges were doing enough to curb insider trading on their platforms, Fox Business has reported.
The Securities and Exchange Commission (SEC) has sent an official communication to at least one crypto exchange seeking information on the processes it followed to protect users from malpractices like insider trading, said the report, citing an unnamed source with knowledge of the probe.
The SEC’s decision to launch an investigation into crypto exchanges follows the collapse of the Terra LUNA token, in which investors lost around $40 billion when its peg to the US dollar was severed.
It was one of the casualties in a crypto crash that lowered the value of the global crypto market to less than $900 billion this month from an all-time high of $3.1 trillion in November 2021.
Fox Business described the DRC investigation into crypto exchanges as “wide-ranging.” It was still unclear if other crypto exchanges had received any communication from the SEC.
SEC chair Gary Gensler, in a speech at an industry event last Tuesday, cautioned investors against schemes offered by lending platforms that seemed too good to be true.
"We've seen again that lending platforms are operating a little like banks. They're saying to investors 'Give us your crypto. We'll give you a big 7% or 4.5% return.' How does somebody offer (such returns) in the market today and not give a lot of disclosure," Gensler said.
He added: “I caution the public. If it seems too good to be true, it just may well be too good to be true.”
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