SEC reportedly probes due diligence of FTX investors, as role of VC firms and funds prior to crypto exchange's collapse comes under scrutiny

• The Securities and Exchange Commission is investigating the due diligence of FTX investors, according to Reuters.
• The probe doesn't indicate wrongdoing, and the report did not specify which firms were in question.
• The issue for regulators is whether venture capital firms and investment funds were acting responsibly on behalf of their own clients.

The US Securities and Exchange Commission is probing the due diligence of FTX investors in the latest wave of scrutiny over cryptos, according to Reuters.

The probe doesn't indicate wrongdoing, and the report did not specify which firms were in question.

But the issue for regulators is whether venture capital firms and investment funds were acting responsibly on behalf of their own clients when they poured money into FTX, sources told Reuters.

US authorities previously requested documents from FTX investors and prospective investors, looking for more details on communication they had with the company.

Those requests went out before regulators and the Justice Department charged FTX founder Sam Bankman-Fried along with other top executives with fraud, and the inquiries have continued since then, Reuters said.

Bankman-Fried has pleaded not guilty to criminal charges while former Alameda Research CEO Caroline Ellison and former FTX chief technology officer Gary Wang have pleaded guilty.

As more details have emerged over how FTX allegedly used client funds to prop up Bankman-Fried's crypto hedge fund Alameda and its risky trades, questions over why FTX investors didn't notice anything amiss have grown.

While the identities of the FTX investors are under SEC scrutiny aren't known, some of biggest names in venture capital and institutional investing are publicly known to have had stakes.

Among the biggest, VC giant Sequoia Capital invested about $200 million in FTX, Singapore's government-owned fund Temasek invested $210 million, investment firm Paradigm had $215 million, and Ontario Teachers' Pension Plan put in $75 million, according to Forbes.

Other FTX investors include Tiger Global Management and SoftBank as well as NFL legend Tim Brady.