It's a reminder to investors how little recourse they have should the trading platforms they do business with go under.
Crypto’s been in a lull lately, stuck between disinterested traders on one hand and regulatory ire on the other. This week’s trial of Sam Bankman-Fried is a stark reminder of how it got there, and why investors should be cautious.
Since FTX’s collapse, crypto executives have been quick to point out the circumstances around the case aren’t unique to the token market, and that similar fraud allegations have been made against traditional finance firms. In the case of securities-related frauds, the Securities Investor Protection Corporation—up to a $500,000 limit—will replace securities or cash missing from investors’ accounts. Some brokers have private insurance that covers their clients even further.
“As it relates to the so-called crypto exchanges, they’re doing what we wouldn’t even allow anywhere else,” said SEC Chair Gary Gensler at a House committee hearing in September. “They’re commingling, co-bundling, trading against the public and sometimes front running the public on their platforms.”
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