FTX founder Sam Bankman-Fried on hot seat as Senate inquiries, criminal probes move forward
Several lawmakers have committed to congressional inquiries into FTX and its founder Sam Bankman-Fried
Sam Bankman-Fried is facing an onslaught of legal repercussions over his involvement in the collapse of FTX, the cryptocurrency trading platform he founded in 2019, with congressional investigations set to take off over the course of the upcoming weeks.
The Senate Agriculture Committee, which is tasked with oversight of the Commodity Futures Trading Commission (CFTC), is planning to hold a hearing on the rapid collapse of FTX this week, with the office of GOP Ranking Member John Boozman of Arkansas giving FOX Business details about the hearing. Boozman's office said the hearing will feature CFTC Chairman Rostin Behnam and focus on "the need to bring transparency and accountability to the crypto market."
"We have previously held hearings on the CFTC’s role in regulating digital assets, and Chairwoman Stabenow and Ranking Member Boozman introduced legislation on it, but the committee is revisiting the issue in light of the events of the past few weeks," a spokesperson for Boozman said in a statement.
"The hearing will give us an opportunity to ask Chairman Behnam what the CFTC needs from Congress to establish a regulatory framework that will give consumers greater confidence that their investments are safe," the statement continued.
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Boozman's office also pointed to the senator's statement on the Digital Commodities Consumer Protection Act of 2022, the legislation he and Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., introduced following FTX's collapse.
Earlier this month, the Bahamas-based FTX filed for bankruptcy after a liquidity crisis led to a mass exodus of customers from the platform. Bankman-Fried had allegedly transferred $10 billion worth of customer credit from FTX to sister firm Alameda Research, according to multiple reports.
Amid the company's demise, Bankman-Fried's estimated net worth plummeted from more than $15 billion to no material wealth in just days. The former billionaire issued a public apology admitting he had "f---ed up" and the new FTX CEO stated during court proceedings that he had never before seen "such a complete failure."
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"From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented," the company's new CEO John Ray III said on Nov. 17.
Ray III previously oversaw the bankruptcy proceedings of failed emery company Enron in early the 2000s. The FTX collapse has also been compared to scandals involving Lehman Brothers and the Ponzi scheme masterminded by former NASDAQ Chairman Bernie Madoff.
House Financial Services Committee Chair Maxine Waters, D-Calif., and the panel's top Republican, Rep. Patrick McHenry, R-N.C., also announced a hearing to investigate FTX. In their joint announcement, the two leaders said their hearings would take place in December and are expected to feature Bankman-Fried as well as other leaders from FTX and Alameda Research.
"The fall of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds," Waters said on Nov. 16.
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And Sen. Sherrod Brown, D-Ohio, the chairman of the Banking Committee and a member of the Finance Committee, said he was planning to lead investigations of his own, but worried that some lawmakers would have conflicts of interest given their financial ties to the crypto industry. Bankman-Fried alone gave tens of millions of dollars to Democrats ahead of the midterm election and about $10 million to help President Biden get elected in 2020.
"It's difficult when a whole lot of members here, particularly the more pro-bank, pro-corporate members, have taken money from crypto companies and have sung their praises in the halls of the Senate," Brown told Fox News on Nov. 17.
"That's the fundamental problem. That's why I'm pushing, especially pushing, the [Securities] Exchange Commission (SEC) to crack down and make sure that they are held accountable for what they've done," he said.
Bankman-Fried contributed to both Boozman and Stabenow's campaigns this year, according to Federal Election Commission data. He wired $50,000 to the group Heartland Resurgence which primarily supported Boozman and opposed his Republican challenger during his state's primary, $20,800 to the Stabenow Victory Fund and maximum individual donations worth $5,800 to each of the lawmakers' individual campaigns.
Boozman's campaign previously told FOX Business that it would donate funds received from Bankman-Fried to charity.
Meanwhile, Sen. Josh Hawley, R-Mo., a member of the Judiciary Committee, asked several top federal regulators to hand over relevant information regarding FTX and their investigations into the platform. Like Brown, he warned that some politicians tasked with looking into the crisis could be compromised.
"To be clear, Mr. Bankman-Fried funded his lavish donations to the Democratic Party through rampant fraud," Hawley wrote to the heads of the Department of Justice (DOJ), SEC and CFTC, in a letter on Nov. 18. "The net result was that billions of dollars were stolen from investors and handed over to Democrats and left-wing organizations."
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Bankman-Fried has reportedly cooperated with authorities in the Bahamas where he remains. The federal government may seek to extradite Bankman-Fried to the U.S. as part of ongoing criminal probes.
The DOJ and SEC are among the U.S. agencies to have initiated probes of their own into the FTX founder.
Stabenow's office didn't respond to a request for comment.