FTX Subsidiary LedgerX Is Under The Crosshairs Of CFTC
- Commodity Futures Trading Commission (CFTC) commissioner Kristin N. Johnson said that the regulator of the US derivatives markets had “boots on the ground” at LedgerX.
- Johnson repeated remarks made by CFTC Chairman Rostin Behnam, who said at a futures conference that his agency’s oversight was responsible for LedgerX’s ability to avoid bankruptcy.
- CFTC requires FTX’s subsidiary to have reserves, including a one-year liquidity reserve, and to refrain from touching, pledging, investing, or posing any other threats to functioning capital.
On Thursday, a commissioner of the Commodity Futures Trading Commission (CFTC), Kristin N. Johnson, stated that the regulator of the US derivatives markets had “boots on the ground” at LedgerX, a US-based division of the FTX, whose CEO had recently resigned due to uncertainty surrounding the functioning of the firm.
At a conference on cryptocurrency regulation in London, Johnson was expressing her views on the matter and stated that the financial regulator was “monitoring and overseeing on a daily, if not hourly basis, verifying what we believe to be the case, which is [that] every dollar of customer assets held at LedgerX continues to be available.”
It is noteworthy that the CFTC and FTX US, the US arm of the bankruptcy crypto exchange, interacted with each other using LedgerX. It submitted an application to the CFTC in 2017 to become a regulated derivatives center before being acquired by FTX the previous year.
She repeated remarks made by CFTC Chairman Rostin Behnam, who said earlier this week at a futures conference that his agency’s oversight was responsible for LedgerX’s ability to avoid bankruptcy. Johnson emphasized that LedgerX was one of the businesses left out of FTX’s bankruptcy filing on Friday.
CFTC’s Regulation Of LedgerX
According to commissioner Johnson, the CFTC had mandated that LedgerX hold segregated funds separately, subject to monthly, quarterly, and annual examinations, and provide balance sheets and verified bank statements to prove the legitimacy of assets held in accounts on behalf of consumers.
Additionally, she claimed, it requires FTX’s subsidiary to have reserves, including a one-year liquidity reserve, and to refrain from touching, pledging, investing, or posing any other threats to functioning capital.
She asserted that the CFTC always has “a number of options” for providing oversight to maintain market integrity, even in the absence of regulation.
And yet, according to Johnson, the CFTC needs direct authority from Congress to interact with market participants and force them to enter the regulatory framework of U.S. markets.
She compared the interaction between American regulators to “coming to Thanksgiving dinner” and added that “there are some folks you might not necessarily sit beside.”
CFTC vs. SEC
There has been a constant struggle between CFTC and SEC over who will be given the green signal to take over the crypto space and the Chairs of both the regulators believe that Bitcoin is a commodity while both have different versions of which tokens can be considered securities and which can be considered as commodities.
Recently, a polician criticized SEC Chai Gary Gensler and called his organization “power hungry.”
“Under Chair Gensler, the SEC has become a power-hungry regulator, politicizing enforcement, baiting companies to “come in and talk” to the Commission, then hitting them with enforcement actions, discouraging good-faith cooperation,” said Gensler.