The FTX implosion has become the financial scandal of the decade, and US lawmakers are already demanding to know who is to blame. On Tuesday, the Senate Banking Committee questioned members of the Fed and other financial agencies about how FTX could have burned through billions of customer and investor funds without anyone noticing. The hearing sparked accusations and calls for new laws to regulate cryptobut the real fireworks will likely begin when Congress questions Securities and Exchange Commission Chairman Gary Gensler, the nation’s top financial cop, about the FTX debacle.
“He’s in a corner,” a Washington insider who’s plugged into the crypto scene told me, saying Congress will be keen to make Gensler understand why his agency botched a massive fraud that happened. unfolded under his nose. Some lawmakers are also likely to ask the SEC Chairman why, just a month before FTX’s implosion, he was instead engaged in a very theatrical enforcement action against Kim Kardashian for a minor token sale starting in 2021. The headaches will only mount after Republicans take control of the House in January and with it the subpoena power. GOP executive Rep. Tom Emmer (R-Minn.) has previously signaled that he is prepared to investigate Gensler over an alleged plan to secure a U.S. regulatory monopoly for FTX after meeting CEO Sam Bankman-Fried in March.
The optics are bad for Gensler, but that doesn’t necessarily mean he’ll lose his job. A source connected to the Democratic Party tells me that Gensler’s strategy will be to portray himself as a hero to keep FTX and other major crypto exchanges overseas – and that influential progressives, who largely hate crypto, the will celebrate for it. Meanwhile, Gensler would also accuse the SEC’s smaller sister agency, the CFTC, since it is responsible for overseeing derivatives (FTX was a derivatives exchange) – a dishonest tactic as Gensler claimed broad crypto jurisdiction. for the SEC.
Meanwhile, the Washington insider told me the GOP risks overplaying its hand by embracing conspiracy theories based on Gensler’s ties to top Democrats. He has a point. After alluding to some of these links in a post last week, my Twitter feed lit up with right-wing fringe elements declaring that Gensler’s actions were part of a larger conspiracy involving George Soros, Bill Clinton, pedophiles, and more. If any of the big loonies among House Republicans start raising such claims publicly, it will only increase loyalty to Gensler among Democrats and the White House.
All of this underscores a growing concern among those serious about crypto politics: the debate over how to regulate crypto is increasingly taking place along partisan lines, a bad development for anyone who cares about crypto and the American innovation. Blockchain is first and foremost a technology that is indifferent to left-versus-right politics and needs the right legal framework to thrive. Hopefully, in Gensler’s next interrogation, this critical point will not be lost.
Tumblr blogs written by Caroline Ellison show the 28-year-old former CEO of Alameda Search was preoccupied with polyamory, Chinese harems, and the Indian caste system. (Decrypt)
Leaked documents shown by Sam Bankman-Fried to investors claim FTXRevenues have increased by 6,600% in two years. (Fortune)
Ten major banks working with the New York Fed are launching a blockchain-based digital currency system called the Regulated Liability Network, or RLN. (PYMNES)
FTXCompany coach said he was ‘shocked’ by SBF’s massive financial fraud and, regarding reports of orgies, staff were ‘undergendered, if anything’ . (NYT)
The small Pacific island nation tuvalu, whose existence is threatened by rising sea levels, plans to build a metaverse version of itself to preserve its geography and culture. (Reuters)
EVEN OF THE MOMENT
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