A U.S. senator is taking aim at the cryptocurrency industry after the exchange platform FTX mishandled billions of dollars worth of customer assets to fund risky trades.
What Happened: Sen. Elizabeth Warren, who recently called the crypto industry "smoke and mirrors," is doubling down on calls for regulatory action to be taken following FTX's bankruptcy, which rocked the sector.
Warren and Sen. Dick Durbin sent a letter demanding that FTX co-founder and former CEO Sam Bankman-Fried turn over documents to shed light on the company's collapse.
The letter also addresses new FTX CEO John J. Ray III.
"With each new day, devastating details emerge about the implosion of FTX. The public is owed a complete accounting of the practices that led to this collapse and the misuse of billions in customers' funds,” Warren tweeted.
The letter calls for “complete and transparent accounting” of the business practices of FTX. Warren and Durbin also question the potential misconduct of users' funds by both FTX and Alameda Research.
“New revelations continue to shed light on what now appears to be an appalling case of greed and deception,” the letter said. “Billions of dollars worth of investor funds seem to have disappeared into the ether.”
The letter makes a request for balance sheets from 2019 until the present day for FTX and all FTX subsidiaries. Questions on a potential backdoor used by FTX to transfer funds out after red flags were raised are also presented in the letter.
Terms of loans to other companies, anti-money laundering documents and KYC (know your customer) policy documents are also requested by the Senators.
Warren and Durbin have requested to have the documents and information by Nov. 28.
The House Financial Services Committee plans to hold a hearing in December about the collapse of FTX. Companies that were involved in the collapse of FTX and individuals like Bankman-Fried could be among those asked to testify.
Why It’s Important: Bankman-Fried, once seen as a crypto hero for spending some $1 billion to help struggling companies during the bear market, has admitted his company got “overconfident and careless.”
Deleted tweets that said FTX was "fine" and does not invest client assets now appear to be false based on new evidence and the company’s balance sheet. This could put 30-year-old Bankman-Fried at the center of a Congressional investigation as calls for regulation of the cryptocurrency industry have increased.
Brian Armstrong, CEO of Coinbase Global COIN, recently responded to Warren saying FTX was an offshore exchange that is not regulated by the SEC. Armstrong also asked for Warren to consider the impact of regulation going forward.
“The problem is that the SEC failed to create regulatory clarity here in the U.S., so many American investors went offshore,” Armstrong said.
The Coinbase CEO said “punishing U.S. companies” for the impact of FTX “makes no sense.”
- Bitcoin BTC/USD is down 0.5% to $16,616.74 on Friday; It's down 1.3% in the last seven days.
- Ethereum ETH/USD is down 0.6% to $1,204.76 on Friday; It's down 3.8% in the last seven days.
- The FTX Token FTT/USD is down 88% to $1.46 on Friday; It's down 46.5% over the last seven days.
To read about the latest FTX developments, check out Benzinga's FTX home page.
Image: Benzinga file photo by Dustin Blitchok.
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