(Reuters) — Prosecutors in the Manhattan district of New York are investigating the collapse of FTX, a source with knowledge of the investigations said on Monday, after the crypto exchange filed for bankruptcy protection last week following a spate of customer withdrawals.
The decline followed a failed bailout deal with rival exchange Binance, with FTX now facing scrutiny from US regulators over its handling of client funds, as well as its crypto-lending activities.
The Manhattan law firm declined to comment.
Reuters reported last week that at least $1 billion in client funds has disappeared from FTX, citing sources.
Cryptocurrencies have disappeared this year as higher interest rates and growing fears of an economic downturn cratered prices, eliminating key players such as Voyager Digital, Three Arrows Capital and Celsius Network.
But the bigger blow to digital assets came after FTX, which had developed a penchant for rescuing troubled crypto companies, showed early cracks. Bitcoin BTC=BTSP has dropped below $16,000 for the first time since late 2020.
“Although investors have suffered significant losses, we believe this second ‘crypto winter’ will be a net positive as the FTX collapse will tie the crypto ecosystem closer to the established financial sector,” Deutsche Bank analysts wrote in a note on Monday.
“The FTX crash highlighted well-known structural problems in the crypto ecosystem: insufficient reserves, conflicts of interest, lack of regulation and transparency, and unreliable data.”