California's Department of Financial Protection and Innovation (DFPI) is investigating the “apparent failure” of the embattled crypto trading platform FTX.

DFPI is responsible for administering the state's lending and banking laws, as well as the state’s consumer financial protection law and securities laws, which govern broker-dealers, investment advisers, and commodities.

“We expect any person offering securities, lender, or other financial services provider that operates in California to comply with our financial laws,” the agency said in a statement Thursday.

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The FTX crisis began last week after Binance CEO Changpeng Zhao announced that the world's largest cryptocurrency exchange would liquidate its holdings of FTT, FTX's native exchange token. Amid the liquidation, users began exiting FTX en masse, leading the exchange to pause withdrawals.

Binance later said it would consider acquiring FTX but pulled out of the deal on Wednesday, citing the results of corporate due diligence and reports regarding mishandled customer funds.

Sam Bankman-Fried, the founder and CEO of FTX, later revealed that the firm is trying to raise funds to make customers whole after a Bloomberg report indicated that the firm is short as much as $8 billion.

DFPI provided little insight into the details of the investigation, nor did it specify whether the probe relates to the Bahamas-based FTX or FTX.US, the exchange's American subsidiary.

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Decrypt has reached out to DPFI for additional comment.

DFPI warns of crypto assets risks

DFPI also stressed that “consumers and investors must be aware that crypto assets are high-risk investments and should not expect to be reimbursed for any losses.”

“The Department warns California consumers and investors that many crypto asset providers may not have adequately disclosed risks customers face when they deposit crypto assets onto these platforms,” reads the statement.

DFPI added that crypto asset providers are not governed by the same rules and protections as banks and credit unions, which are required to have deposit insurance, and encouraged affected persons to file a complaint.

There was another blow for FTX Thursday when the Securities Commission of the Bahamas moved to freeze the exchange's assets and related parties. FTX has its headquarters in Nassau.

The agency also suspended the firm's operation registration and asked the Supreme Court of the Bahamas for a provisional liquidator to be appointed.

In a separate development of events earlier this week, the U.S. Securities and Exchange Commission (SEC) reportedly deepened its investigation into FTX, while the Commodity Futures Trading Commission (CFTC) and the Department of Justice (DOJ) launched their own probes into the exchange.

Last month, the Texas Securities Board also began investigating FTX, FTX US, and CEO Sam Bankman-Fried over alleged securities violations.

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