The Federal Trade Commission (FTC) is currently investigating the operators of crypto exchange BitMart, which lost between $150 million and $200 million of consumer funds in a December 2021 cyberattack.
This is FTC’s first known investigation in the crypto markets.
The agency is looking into BitMart’s U.S. operators Bachi.Tech and Spread Technologies. FTC commissioners recently denied the operators’ petition to stop demands for certain company documents in order.
In December of last year, BitMart suffered a large-scale security breach related to hot wallets hosted over the Ethereum and Binance Smart Chain blockchains.
Sheldon Xia, CEO of the exchange promised the users that the exchange would use its own funds to ‘to cover the incident and compensate affected users.’
In May, FTC subpoenaed Bachi.Tech Corporation and Spread Technologies to determine whether these companies misled the users of BitMart about the extent of its data security and consumer privacy protections.
FTC is also investigating both operators under the Gramm-Leach-Bliley Act, which dictates safeguards for personal information of users.
Both the operators argued that the FTC’s Civil Investigative Demand (CID) is demanding irrelevant information that would unlikely lead to material evidence.
They claimed that the regulator’s demand for records was “overbroad” and “unduly burdensome”. The FTC says that these arguments are “without merit,” and the claims of undue burden and overbreadth are “conclusory and unsupported.”
Moreover, in the order, the FTC stated that “the process recipient must show how responding to the CID request would impose a significant disruption to its business operations.”