Conflicting Reports Emerge About SEC Helping Bankrupt Crypto Exchange FTX With Legal Loopholes

Conflicting Reports Emerge About SEC Helping Bankrupt Crypto Exchange FTX With Legal Loopholes Bitcoin Regulatory News

The U.S. Securities and Exchange Commission (SEC) reportedly met with crypto exchange FTX and former CEO Sam Bankman-Fried several times before the crypto firm filed for bankruptcy. SEC Chairman Gary Gensler is rumored to be helping FTX close the legal loopholes. However, a new report indicates a contradictory view.

Gensler’s meeting with Sam Bankman-Fried and FTX

Following the bankruptcy filing of cryptocurrency exchange FTX, rumors surfaced accusing U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler of helping the former FTX CEO , Sam Bankman-Fried, and its bankrupt exchange with “legal loopholes to gain regulatory monopoly.” .” Some people even speculated that the SEC boss was about to issue a no-action letter to FTX.

Gensler’s own timeline shows he met Bankman-Fried in March. According to an SEC meeting note, “Members of Chairman Gensler’s staff met with IEX and FTX staff to discuss custody of digital asset securities by special purpose brokers, including the unique risks associated with the custody of digital asset securities and the conditional no-action waiver discussed in the statement.

However, Charles Gasparino of Fox Business Explain on Twitter on Saturday that “contrary to speculation” about Gensler seeking to grant former FTX CEO Sam Bankman-Fried a regulatory monopoly over a crypto exchange:

The March meeting between the two parties was described by one person in attendance as a “45-minute lecture by Gensler” about what he wants from a crypto exchange.

Not only did the SEC Chairman make no promises to Bankman-Fried, FTX and IEX, but he also “directed them to provide a lot more information etc. to the SEC on their model,” the reporter noted. .

“Follow-up meetings with the SEC continued almost to the time FTX imploded, but no SEC approvals were reported,” he continued. “The GOP House likely to hold hearings on FTX given Bankman-Fried’s political leanings in calling Gensler as a witness may have to think twice. Sources say Gensler told Brad Katsuyama and Bankman-Fried he wanted strict oversight, standards and there was no guarantee of approval.

Nonetheless, many people have expressed on social media their belief that Gensler or other SEC staffers are helping FTX. Some suspected it was because Bankman-Fried is a big donor to the Democratic Party. The former FTX chief was the second-biggest donor to Democrats in 2021-22, donating $39.8 million — second only to George Soros, according to political donor data from Open Secrets.

Referring to the sanction of crypto mixing service Ethereum Tornado Cash, privacy activist and whistleblower Edward Snowden tweeted:

The White House is sanctioning and arresting children for the ‘crime’ of creating privacy tools to protect you, while ‘regulators’ quietly went after the thieves who had just robbed 5 million people. The difference? The thieves were big political donors.

Congressman Tom Emmer (R-MN) tweeted Thursday, “Reports to my office allege he was helping SBF and FTX work out legal loopholes to gain a regulatory monopoly. We are looking at that.

Last week, Gensler confirmed during an interview on CNBC that he had met Bankman-Fried. The SEC chairman said, “I think we’ve been clear in these meetings … non-compliance won’t work, the public is going to be hurt.”

The SEC chairman has often been criticized for his enforcement-centric approach to regulating the crypto industry. Gensler has repeatedly stated that crypto trading and lending platforms should “come in,” talk to the SEC, and register. However, Ripple CEO Brad Garlinghouse said in September last year that instead of working with the crypto industry, “the SEC uses its meetings with the companies as a source of leads for its crypto stocks. ‘application”. His company is currently engaged in an ongoing lawsuit with the SEC regarding the sale of XRP.

Additionally, several news outlets have reported that the SEC and the Commodity Futures Trading Commission (CFTC) are investigating FTX for alleged mismanagement of customer funds. In May, Gensler warned that crypto exchanges often trade against their clients.

Do you think the SEC and Chairman Gensler were working with crypto exchange FTX and Sam Bankman-Fried on the legal loopholes? Let us know in the comments section below.

Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.

Image credits: Shutterstock, Pixabay, Wiki Commons

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