The collapse of FTX and its subsequent bankruptcy has been the talk of the town this month. The troubled exchange’s moves have been under the scrutiny of everyone interested, with new information being uncovered every day.
Investors and customers have called for an investigation into former CEO Sam Bankman-Fried’s questionable business practices. In fact, many have also questioned the lack of enforcement action by regulators.
Elizabeth Warren and Richard Durbin, United States Senators from Massachusetts and Illinois, respectively, have now penned a letter to Sam Bankman-Fried and FTX’s new CEO John Ray III. They are demanding answers regarding the collapse of the world’s second-largest crypto-exchange, a collapse which wiped out more than $180 billion.
Describing the whole affair as “an appalling case of greed and deception,” the senators alleged that poor management and a lack of risk management on the executives’ part ultimately led to people losing their savings.
Senators are seeking FTX documents
Senators Warren and Durbin took cognizance of the suspicious multi-billion dollar transactions among executives and between FTX and Alameda Research. Additionally, they brought up the role of FTX’s native token FTT, which was used by the Bahamas-based exchange as collateral for massive loans.
Finally, they concluded by saying that the public is owed a complete account of the exchange’s affairs. To that end, they are seeking the following information,
- Balance sheets of FTX and its subsidiaries
- Details of FTX officials responsible for the poor internal management of the exchange
- Information on the alleged backdoor installed by Bankman-Fried to access funds without due authorization
- Complete list of all transfers made by FTX to Alameda Research
- Clarity on the $1.7 billion worth of customer funds that are reportedly missing
- A complete copy of all internal communications and/or materials related to the transactions that occurred on 12 November
- Details of U.S based platforms that have utilized FTX.com
Interestingly, the senators have not demanded any information related to the millions SBF donated to Democratic party candidates during the 2022 elections.
According to Opensecrets.org, Bankman-Fried made the second-largest donation – $39.8 million. To add to the irony, Sam Bankman-Fried’s father Joseph Bankman has been known to assist Senator Elizabeth Warren in drafting legislations related to taxes.
Politicians react to FTX’s meltdown
Cynthia Lummis, the U.S Senator from Wyoming, previously brought up the need for stricter regulations after Binance’s FTX acquisition deal fell apart. On 10 November, Maxine Waters, the Chair of the U.S House of Representatives Financial Services Committee, called for additional federal regulation of crypto-exchanges.
Stefan Berger, a member of the European Parliament, compared FTX’s predicament to the collapse of Lehmann Brothers in 2008.
Shame! The #FTX/#Alameda case has cost enormous trust. Such Lehman Brothers moments must be prevented in the crypto space. That's exactly what #MiCA is for. Crypto assets are not play money. Crypto asset service providers must ensure internal risk management mechanisms. https://t.co/zNrB8CdUbU
— Stefan Berger (@DrStefanBerger) November 9, 2022
Senator Warren also took to Twitter last week to criticize the lack of regulations in the crypto industry amid FTX’s liquidity crisis.
“The collapse of one of the largest crypto-platforms shows how much of the industry appears to be smoke and mirrors,” she said. She also urged the SEC to undertake aggressive enforcement measures in the interest of consumer protection.
