FTX Collapse Pushes FINRA To Investigate Crypto Retail Communications
Many reactions have been erupting following the collapse of the FTX crypto exchange. The crypto market is thrown into a devastating state as prices of most assets are declining. Many participants and observers are losing confidence in the security of the industry. The list of events unfolding has become quite massive as the days roll by.
There have been revelations of losses of many firms and venture investors on the distressed exchange. Moreover, the contagion kept spreading as more companies declared massive exposure to FTX.
Regulators from different jurisdictions are reacting to the fall of FTX. The trigger comes from the surrounding circumstance and connection between FTX’s CEO, Sam Bankman-Fried, and his trading platform Alameda Research.
Recently, the American self-regulatory organization, the Financial Industry Regulatory Authority (FINRA), has moved around the trending situation. The regulator has investigated the firms’ retail communications regarding their crypto products and services.
FINRA Probes Crypto Firms on Retail Communications
The regulator released an official announcement stating its launch of a targeted probe on crypto-related companies. It aims to dig into their operations in handling retail communications covering the beginning of July to the end of September. The collapse of the FTX crypto exchange triggered this new move in investigating retail crypto communication.
The regulator started the probe. It investigates if any retail crypto products and services had a false advertisement. During the hit of the crypto bull run, crypto advertisements grew and promoted several brands and celebrities. Crypto ads championed the Super Bowl 2022, as FTX prominently featured as one of the most popular ads during the period.
Additionally, the FINRA has categorized how it will engage the probe. It mentioned that any written or electronic message issued or made available to over 25 retail investors within 30 days is regarded as retail communication. Also, the regulator stated that the same applies to videos, mobile apps, social media, websites, and writing communications.
The regulator released its probing notice, requesting that firms provide information for each personal communication. These include the date of its first publication and evidence of filing with FINRA’s advertising regulation department.
Also, they will present evidence of approval of communication by a principal at the firm and identification of the crypto tokens or services stated in the communication.
Crypto Advertisements Raised Massive Dust
Before now, crypto advertisements suddenly heightened in different regions. The spike brought great concern to regulators since most ads do not comply with regulatory standards. Many focused on highlighting the possible profits in crypto investment while concealing the associated risks.
Earlier in the year, some jurisdictional regulators like Singapore, the United Kingdom, and Spain tightened their regulations. For example, they gave stricter requirements for marketing messages and customer enrollment processes for crypto firms. Also, some countries imposed restrictions on crypto advertisements due to the decline in the crypto market.
Some celebrities, such as Steph Curry, Tom Brady, and Larry David, brand ambassadors for FTX, are hit with a class-action lawsuit. They were alleged of advertising FTX’s fraudulent scheme.Source