The investigation follows the FTX fiasco, in which a cryptocurrency exchange was exposed for mismanaging its users’ money by flat-out lying about how it operated.
After the FTX debacle, which found that a crypto exchange was mishandling customers’ money by lying about how it worked, the government decided to look into the matter.
The American Financial Industry Regulatory Authority (FINRA), a self-regulatory group, has started looking into how the company talks to retail clients about the crypto products and services it offers.
The regulatory agency declared in an official notice that, between July 1 and September 30, it would conduct a focused examination of businesses based on how they handled retail communications. The failure of the FTX cryptocurrency exchange led to the decision to look into crypto-related retail communications.
FINRA says a “retail communication” is any written (including electronic) statement sent to or made available to more than 25 retail investors within 30 days. In addition to written communications, it includes video, social media, mobile apps, and websites.
In its exam notice, FINRA requested that firms provide additional information for each individual communication, including the date it was made public for the first time, whether it was filed with FINRA’s advertising regulation department, whether a principal at the firm approved the communication and the crypto assets or services mentioned in the communication.
