SEC launches insider trading probe into major US exchange after UST/LUNA crash


The U.S. Securities and Exchange Commission (SEC) is concerned about insider trading on digital asset exchanges, a new report has revealed. The watchdog has reportedly sent a letter of inquiry to one of the country’s major stock exchanges as it seeks to determine what measures are in place to protect customers who are unaware.

Fox Business first reported the SEC’s latest ruling in the digital asset sector at a time when more and more regulators are concerned. Quoting a person familiar with the matter, the outlet claims that in the letter, the SEC wanted to know how the platform identifies and foils instances of insider trading facilitated by its network.

The identity of the exchange targeted by the SEC has not been disclosed, but the source says the watchdog is also suing several others. Representatives from major exchanges including, FTX and Coinbase (NASDAQ: PIECE OF MONEY), all declined to comment, with the SEC taking a similar stance.

The regulator’s latest probe is no surprise. Since early May, the market has been rocked by chaos following the collapse of the “unstable” UST coin and its sister token LUNA, both developed by Terraform Labs under the leadership of Do Kwon.

Almost immediately after the collapse of LUNA and UST, which together had a market capitalization of more than $58 billion, SEC Chairman Gary Gensler told Bloomberg that the commission was concerned that stock exchanges digital assets do not segregate their different lines of business, such as custodial, manufacturing, and service trading well enough to avoid interference.

“Crypto has a lot of these challenges – platforms that trade before their customers. In fact, they often trade against their clients because they mark the market against their clients,” Gensler said in the Bloomberg. interview may’s beginning.

Gensler’s concerns are valid. With minimal oversight of their activities, exchanges in the digital asset space operate with a “make money at all costs” mentality and care little about their users.

One of the biggest market makers in the industry today is Alameda Research, a company founded by Sam Bankman-Fried (SBF), who also happens to be the CEO and founder of FTX, one of the biggest exchanges in the world. As CoinGeek previously reported, Alameda is at the heart of the Tether crime cartel, and as of November last year, it had received almost a third of all USDT ever printed. SBF has even been sued for market manipulation in the past.

Additionally, Alameda is one of the industry’s largest investors in token projects. One of the firm’s and SBF’s favorite projects is Solana, a project that promised to solve all of Ethereum’s scaling challenges, but ended up being worse off with regular outages. SBF hasn’t been shy about promoting Solana every chance he gets and claiming it’s the next bitcoin.

With all these complexities in the industry, Jeremy Hogan thinks the SEC’s concern over insider trading comes as no surprise. The digital currency attorney at Hogan & Hogan LLP told Fox Business,

“A request for more information from the SEC on crypto exchanges would make sense given the SEC’s recent focus on exchange regulation, ostensibly in the name of consumer protection,” Hogan said.

“In the past, there have been allegations of insiders buying large amounts of tokens that were going to be listed on the exchange (thereby increasing the price) but the listing was not yet publicly known, and that is what kind of trade that the SEC might be warning the exchange they need to take over,” he added.

Although it has not yet been revealed which exchange the SEC sued, Coinbase is notorious for its insider trading charges. In the past, it has been observed that whenever a digital currency was to be listed on the US stock exchange, it was bought en masse a few days before the announcement and discarded once it exploded after the unveiling.

These allegations were recently relaunched by some sharp-eyed traders who spotted erratic activity on the tokens Coinbase later listed. CEO Brian Armstrong responded in a blog postadmitting that “there is always the possibility that someone inside Coinbase could, knowingly or unknowingly, leak information to outsiders engaging in illegal activity.”

Follow The CoinGeek Crypto Crime Cartel series, which dives into the flow of groups of BitMEX at Binance,, Blockstream, Metamorphose, Coinbase, Ripple,
Ethereum, FTX and Attached—who co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) market players.

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