SEC chairman Gary Gensler was recently under fire for allowing many intermediary companies to defraud their investors.
The chairman received strong criticism for failing to protect US citizens from potentially fraudulent activities.
The attack on the SEC’s main official comes after the arrest of Sam Bankman-Fried, the ex-CEO of the now-infamous CEX platform FTX.
In an attempt to prove that the SEC is doing its due diligence and ensures that people in the country are protected from companies like FTX, the agency rolls out a set of guidelines.
Companies that are involved with crypto must disclose risks
It is true that one of the reasons why the FTX collapse had such an effect on so many individuals and institutional investors is that the CEO of SBF did not disclose potential risks.
His activities were fraudulent in nature. However, the failure to disclose any information about what FTX was doing and how crypto can be dangerous as an investment was the ultimate reason why many fell for his pitches.
While this particular case is a perfect example of a conman doing what they do best and going to jail for it, his tricks are indistinguishable from what many other companies are doing.
Even if their approach to the business is legitimate and sound, they are often downplaying risks and putting their investors at high risk.
The SEC advises all companies working in the financial sector to disclose any information about their involvement in the crypto industry.
Whether they have equity stakes in companies and decentralized projects, invest in tokens, or otherwise interact with the industry, they must disclose this information to investors.
The fallout of the FTX bankruptcy is massive
Over 100 thousand affected investors and over a million creditors have to be served some compensation after the assets of the company are liquidated.
It is the biggest financial scandal in decades, but it is also something that had to happen to the crypto industry for it to restructure and turn into something that everyone can respect. Cleaning the house is a highly important step in this direction.