The Securities and Exchange Commission (SEC) has launched an investigation to ascertain if cryptocurrency exchanges are doing enough to curb insider trading on their platforms, according to a report by Fox Business.
Quoting an unnamed source having knowledge of the investigation, the report states that at least one crypto exchange has been sent an official communication by the SEC seeking information on the processes followed to protect its users from malpractices like insider trading.
The SEC’s decision to launch an investigation into the crypto exchanges follows the collapse of the Terra LUNA (CRYPTO: LUNA) token, in which investors lost around $40 billion when it lost its peg to the US dollar.
The report describes the investigation into the crypto exchanges as “wide-ranging” however it is still unclear if other crypto exchanges have received any communication from the SEC.
SEC chair Gary Gensler, speaking at an industry event last Tuesday, had cautioned investors against schemes by lending platforms that seemed too good to be true.
"We've seen again that lending platforms are operating a little like banks. They're saying to investors 'Give us your crypto. We'll give you a big return 7% or 4.5% return.' How does somebody offer (such large percentage of returns) in the market today and not give a lot of disclosure?" Gensler had said, adding, “I caution the public. If it seems too good to be true, it just may well be too good to be true.”
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