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- While FTX filed for bankruptcy, its Derivatives trading arm is still standing.
- FTX US Derivatives is regulated by the US CFTC.
- Benham did not comment on any enforcement plans.
CFTC regulatory oversight reason why FTX US Derivatives is still standing
Commodity Futures Trading Commission (CFTC) chairman Rostin Benham believes that the US Derivatives arm of now bankrupt FTX is still standing because of the commission’s oversight.
Sam Bankman Fried’s FTX, the third largest cryptocurrency exchange, went bankrupt last week after discrepancies in its books were exposed via a leaked balance sheet. Investors panicked, however, the last nail in the coffin was Chao Zhang’s tweet informing investors that BInance had liquidated its FTT reserves.
Speaking at a Futures Industry event in Chicago, Benham explained why the derivatives arm of FTX is not embroiled in FTX’s mess: “the reason is because – I believe pretty strongly – that they are very clearly regulated by the CFTC”
“It’s a testament to CFTC regulations and CFTC staff and the benefit of having clear, transparent rules,” he added.
Last year, LedgerX was renamed FTX US Derivatives after FTX US acquired Ledger Holdings Inc., the parent company of LedgerX. With the acquisition, FTX gained access to Designated Contract Market (DCM), Swap Execution Facility (SEF), and Derivatives Clearing Organization (DCO) – regulated by the CFTC.
Benham added that the commission was in contact with the Derivatives trading platform on a daily basis instead of the usual monthly reporting schedule.
The Chairman expressed confidence over the company’s status and asserted that the commission was ‘vigilant.’ Regarding the FTX debacle, Benham did not comment on any enforcement plans and reminded that the CFTC had the authority to enforce in cases of fraud and manipulation with respect to direct trade in crypto commodities.
Citing the FTX crisis, Benham emphasized that a regulatory framework needs to be established and that the Congress needs to act fast.
“We don’t have the luxury of time anymore,” he added.
Interestingly, estranged former CEO of FTX Sam Bankman Fried had applied for a permit to directly clear commodities. The application was formally withdrawn later.
CFTC: enforcing the financial structure
According to a leading crypto media firm, the CFTC sued Ooki, a Decentralized Autonomous Organization (or DAO) for the ‘illegal sale of leveraged and margin traded crypto products’ to investors in the US. Later, the commission retorted to four amicus briefs filed in support of Ooki.
The legal status of DAOs is another bone of contention similar to the status of cryptocurrencies as securities. Financial regulation agencies like the SEC and CFTC are often accused of regulating via enforcement. All these enforcement actions and major fallouts highlight the need for a robust regulatory framework to support the crypto and blockchain universe.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
