US authorities, including the Department of Justice, have contacted crypto exchange Binance for information on its recent interactions with FTX in the two companies’ talks about a potential bailout, according to a person briefed on the situation.
Binance heard from US financial regulators, the person said, in addition to European regulators, asking for insight into what Binance executives learned this week about the inner workings of FTX.
A Binance spokesperson declined to comment on the discussions. A Washington-based FTX official did not immediately respond to a request for comment.
Binance, the world’s largest crypto platform by volume, had considered an emergency acquisition of FTX to save the company from its billion-dollar liquidity crunch, a person familiar with the talks said.
But Binance’s due diligence team quickly uncovered murky conflicts with FTX’s relationship with Alameda Research, the trading company also founded by FTX CEO Sam Bankman-Fried, the person said. And FTX client funds appeared to have been used for business purposes, according to the person.
The company’s collapse caused concern from industry and government.
“It’s crucial that our financial watchdogs examine what led to FTX’s collapse, so that we can fully understand the misconduct and abuse that took place,” Sen. Sherrod Brown (D-Ohio) said Thursday. ).
Also this week, FTX US’s top lawyer instructed employees to keep work-related documents, another sign of potential legal exposure for Bankman-Fried’s crypto empire. On Wednesday, FTX US General Counsel Ryne Miller instructed staff to preserve emails, messages, notes and documents resulting from their work at FTX, FTX US, Alameda and affiliates, sources told CoinDesk.