With FTX teetering on the brink of collapse, former CEO Sam Bankman-Fried has fallen out of favor as an industry “darling” in Washington and caught the eye of regulators and lawmakers on both sides.
Bankman-Fried, who has been on Capitol Hill regularly for the past year as an industry advocate, tweeted Thursday that he was sorry. “I screwed up and I should have done better,” he said.
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Bankman-Fried has resigned as CEO of the cryptocurrency exchange he founded, and FTX has filed for Chapter 11 bankruptcy, the company announced on Friday.
The corporate implosion has led White House Biden and two powerful Democratic committee chairs to publicly criticize FTX and call for stricter oversight of the broader industry.
Excluding the cryptocurrency exchange’s U.S. operations, Bankman-Fried tweeted that the firm’s international operation has a total market value of assets and collateral that is greater than customer deposits, but he said that it is “different from liquidity for delivery – as you can see from the statement of drawdowns.”
Binance, a separate cryptocurrency exchange, announced on Wednesday that it was backing away from acquiring FTX “due to corporate due diligence, as well as recent news reports regarding mismanaged client funds and alleged agency investigations. American”. 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, plans to open a congressional investigation, or even call Bankman-Fried to the hill to testify about the company’s near-collapse in the coming weeks, according to a committee aide who requested anonymity to discuss the private deliberations. Democrats risk losing control of the House in January, depending on the outcome of several key races that have yet to be called.
“Now more than ever, it’s clear that there are major consequences when cryptocurrency entities operate without strong federal oversight and customer protections,” Waters said in a statement Thursday.
If the House switches to Republicans, Rep. Patrick McHenry, the current GOP committee ranking member, will likely become the speaker, but it’s unclear what McHenry is up to. The Crypto Innovation PAC, which is funded in part by a separate group that received millions in donations from Bankman-Fried, supported McHenry’s successful 2022 re-election campaign. The FTX CEO donated over $30 million dollars for the 2022 midterms, according to Federal Election Commission records.
However, he indicated the need for legislation to rein in the industry after Binance announced they would acquire the company to help avert a liquidity crunch.
“Recent events show the need for congressional action,” McHenry said in a statement Tuesday. “It is imperative that Congress establish a framework that ensures Americans have adequate protections while allowing innovation to thrive here in the United States”
Late last year, Bankman-Fried told lawmakers during a hearing, “There are irresponsible players in the digital asset industry, and those players are making headlines, but FTX isn’t is not one of them and has in fact 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 access to Capitol Hill lawmakers as investigators uncover what happened. .
“Now you see the Washington darling, who knew people, mostly Democrats, and that character, just evaporated,” Himes said. When asked what Bankman-Fried looked like, Himes replied “he was your classic founder. A nerdy genius and you assumed he had twice the IQ you had.”
Sen. Sherrod Brown, D-Ohio, chairman of the influential Senate Banking Committee, called on regulators to look into what happened at FTX.
“It is crucial that our financial watchdogs examine what led to FTX’s collapse so that we can fully understand the misconduct and abuse that took place,” Brown said in a statement.
White House press secretary Karine Jean-Pierre told reporters on Thursday that FTX’s near collapse proves more regulation is needed.
“The most recent news further underscores these concerns and highlights why careful regulation of cryptocurrencies is indeed necessary,” Pierre said. “The White House, along with relevant agencies, will again be closely monitoring the situation as it develops.”
Bankman-Fried donated $5 million in the 2020 election to a super PAC that backed candidate Joe Biden as he took on former President Donald Trump.