Conflicting reports emerge that SEC legal loopholes helped collapse crypto exchange FTX – Bitcoin News Regulation


The US 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 was rumored to have helped FTX with legal loopholes. However, a new report presents a conflicting view.

Gensler’s meeting with Sam Bankman-Fried and FTX

Following the collapse of cryptocurrency exchange FTX, US Securities and Exchange Commission (SEC) Chairman Gary Gensler was rumored to have aided former FTX CEO Sam Bankman-Friede in “bankruptcy through legal loopholes to gain a regulatory monopoly.” .” Some people even speculated that the SEC boss was about to send a no-action letter to FTX.

Gensler’s own calendar shows that he met with Bankman-Fried in March. According to the SEC meeting minutes, “Members of Chairman Gensler’s staff met with IEX and FTX staff. discuss custody of digital asset securities by special purpose broker-dealers, including the unique risks associated with custody of digital asset securities and the elimination of conditional defaults discussed in the statement.”

However, Fox Business’ Charles Gasparino he explained “Contrary to speculation,” he tweeted Saturday about Gensler, who wants to give former FTX CEO Sam Bankman-Fried a regulatory monopoly on the cryptocurrency exchange:

One person who attended the March meeting between the two parties described it as “a 45-minute lecture from Gensler” about what he wanted from the cryptocurrency.

The reporter noted that the SEC chairman not only made no promises to Bankman-Fried, FTX and IEX, but “ordered them to give more in the way of disclosures to the SEC about their models and so on.”

“Follow-up meetings with the SEC continued until around the time FTX imploded, but no SEC approval was signaled,” he said. “The possibility of the House GOP holding hearings on the FTX, given Bankman-Fried’s Dem political leanings by calling Gensler as a witness, may have to think twice. Sources say Gensler told Brad Katsuyama & Bankman-Fried there was no guarantee of strict oversight, standards and approval.

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

Addressing the sanctioning of Ethereum cryptocurrency mixing service Tornado Cash, privacy activist and whistleblower Edward Snowden tweeted:

The White House sanctioned and jailed kids for the “crime” of creating privacy tools to protect you, while “regulators” quietly dealt with thieves who just robbed 5 million people. The difference? Thieves were big political donors.

Congressman Tom Emmer (R-MN) tweeted Thursday: “Reports to my office allege he helped SBF and FTX exploit legal loopholes to gain regulatory monopoly. We are investigating it.”

Last week, Gensler confirmed that he had met with Bankman-Fried during an interview with CNBC. The SEC chairman said: “I think we’ve been clear in these meetings … non-compliance will not work, the public will suffer.”

The SEC chairman is often criticized for his enforcement-centric approach to regulating the cryptocurrency industry. Gensler has repeatedly said that cryptocurrency trading and lending platforms must “come on board,” talk to the SEC and register. However, Ripple CEO Brad Garlinghouse said in September of last year that instead of working with the crypto industry, he “used SEC meetings with companies as lead generation for enforcement actions.” His company is currently involved in ongoing litigation with the SEC over the sale of XRP.

In addition, several news outlets reported that the SEC and the Commodity Futures Trading Commission (CFTC) are investigating FTX for alleged mismanagement of client funds. In May, Gensler warned that cryptocurrency exchanges often trade against their customers.

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

Kevin Helms

Kevin, an Austrian Economics student, discovered Bitcoin in 2011 and has been an evangelist ever since. His interests lie in Bitcoin security, open source systems, network effects, and the intersection of economics and cryptography.

Image credits: Shutterstock, Pixabay, Wiki Commons

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