As FTX teeters on the point of collapse, former CEO Sam Bankman-Fried has fallen out of favor because the industry “darling” in Washington and drawn scrutiny from regulators and lawmakers in each parties.
Bankman-Fried, who was a daily presence on Capitol Hill over the past yr as an industry advocate, tweeted on Thursday that he was sorry. “I f—ed up, and will have done higher,” he said.
Bankman-Fried stepped down as CEO of the cryptocurrency exchange he founded, and FTX filed for Chapter 11 bankruptcy protection, the corporate announced Friday. A spokesman for FTX and Bankman-Fried didn’t return a request for comment.
Sam Bankman-Fried, founder and chief executive officer of FTX Cryptocurrency Derivatives Exchange, during a Senate Agriculture, Nutrition and Forestry Committee hearing in Washington, D.C., on Wednesday, Feb. 9, 2022.
Sarah Silbiger | Bloomberg | Getty Images
The corporate’s implosion has led the Biden White House and two powerful Democratic committee chairs to publicly criticize FTX and call for tighter oversight of the broader industry.
Excluding the cryptocurrency exchange’s U.S. business, Bankman-Fried tweeted that the corporate’s international operation has a complete market value of assets and collateral that’s higher than client deposits, but he said that’s “different from liquidity for delivery — as you may tell from the state of withdrawals.”
Binance, a separate cryptocurrency exchange, announced Wednesday that it was backing out of acquiring FTX “because of this of corporate due diligence, in addition to the most recent news reports regarding mishandled customer funds and alleged U.S. agency investigations.” The Securities and Exchange Commission and the Department of Justice are reportedly investigating FTX for civil and criminal violations of securities laws.
Rep. Maxine Waters, D-Calif., chair of the House Financial Services Committee, is considering opening a congressional inquiry, even possibly calling Bankman-Fried to the Hill to testify in regards to the company’s near collapse in the approaching weeks, in response to a committee aide who requested anonymity to debate private deliberations. Democrats are susceptible to losing control of the House in January, depending on the final result of several key races that have not been called yet.
“Now greater than ever, it is obvious that there are major consequences when cryptocurrency entities operate without robust federal oversight and protections for patrons,” Waters said in a press release Thursday.
If the House flips to Republicans, Rep. Patrick McHenry, the present GOP committee rating member, will likely turn out to be the chairman. The Crypto Innovation PAC, which is financed partly by a separate group that saw thousands and thousands in donations from Bankman-Fried, backed McHenry’s successful 2022 reelection campaign. The FTX CEO donated greater than $30 million toward the 2022 midterms, in response to Federal Election Commission records.
Nevertheless, McHenry indicated the necessity for laws to rein within the industry after Binance initially announced it could acquire the corporate to assist stave off a liquidity crunch.
“The recent events show the need of Congressional motion,” McHenry said in a press release Tuesday. “It’s imperative that Congress establish a framework that ensures Americans have adequate protections while also allowing innovation to thrive here within the U.S.”
Late last yr, Bankman-Fried told lawmakers at a hearing, “There are irresponsible actors within the digital-asset industry, and people actors attract the headlines, but FTX just isn’t one among them and actually has built a resilient, risk-reducing platform as a competitive advantage.”
Rep. Jim Himes, D-Conn., a member of the House Financial Services Committee, said it’s clear Bankman-Fried will lose his access to lawmakers on Capitol Hill as investigators uncover what happened.
“Now you see the Washington darling, who knew people, mainly Democrats, and that persona, just evaporate,” Himes said. When asked what Bankman-Fried was like to fulfill with, Himes said, “he was your classic founder. Nerdy genius and also you assumed he had twice the IQ you probably did.”
Sen. Sherrod Brown, D-Ohio, chair of the influential Senate Banking Committee, called on regulators to look into what happened at FTX.
“It’s crucial that our financial watchdogs look into what led to FTX’s collapse so we will fully understand the misconduct and abuses that took place,” Brown said in a press release.
White House press secretary Karine Jean-Pierre told reporters Thursday the near collapse of FTX proves more regulation is required.
“Probably the most recent news further underscores these concerns and highlights why prudent regulation of cryptocurrencies is indeed needed,” Pierre said. “The White House, together with the relevant agencies, will again closely monitor the situation because it develops.”
Bankman-Fried donated $5 million throughout the 2020 election to a brilliant PAC that supported then candidate Joe Biden as he took on former President Donald Trump.
