After FTX Collapse, US and UK Regulators 'Pressure'... Preparing Investigations and Regulations on False Advertising

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Jeong Hyunjin] Following the collapse of FTX, the world's third-largest cryptocurrency exchange, regulatory authorities in the United States, the United Kingdom, and other countries are intensifying their pressure. After this year's Terra-Luna incident and the FTX bankruptcy filing, the cryptocurrency industry has been so shaken that it is being called the 'wild west' within the financial sector, prompting a series of moves to restore order.

According to Bloomberg and other sources on the 5th (local time), the U.S. Federal Trade Commission (FTC) is investigating allegations that several cryptocurrency companies engaged in false advertising or misled users through advertisements. The FTC refrained from commenting on specific details but stated, "We are investigating whether there have been any violations related to digital assets."

Following the FTX incident, investors sued the company, claiming that FTX engaged in false advertising. These investors argued that they were deceived by endorsements from celebrities such as NFL's Tom Brady and NBA's Stephen Curry, who appeared in FTX advertisements, and that they were unaware that their accounts involved "unregistered securities." These celebrities are already under investigation by the Texas State Securities Board (TSSB).

Cryptocurrency-related companies have conducted large-scale advertising campaigns to build brand awareness among consumers. In this process, they recruited celebrities, including sports stars, focusing solely on promotion without highlighting the risks of cryptocurrencies. As user damages increased, regulatory authorities appear to be stepping in to examine the situation.

In the United States, the House Financial Services Committee is scheduled to hold a hearing on the FTX incident on the 13th. Maxine Waters, a Democratic member of the U.S. House, posted on her Twitter that Sam Bankman-Fried, the founder of FTX, must attend the hearing. The day before, Bankman-Fried had said he would testify after reviewing the case, but Chairwoman Waters demanded that he appear before Congress.

Outside the U.S., the United Kingdom, a traditional financial powerhouse, is preparing regulations to apply to the cryptocurrency industry. According to foreign media, the Treasury has nearly completed a comprehensive regulatory package covering restrictions on foreign cryptocurrency companies operating in the UK, responses to company bankruptcies, advertising restrictions, and more. Relevant ministers are expected to soon begin discussions on how to implement these regulations.