Members of the Senate Agriculture Committee discussed the collapse of cryptocurrency exchange FTX in a Thursday hearing, during which a top regulator acknowledged that he met with former CEO Sam Bankman-Fried on multiple occasions.
FTX recently filed for bankruptcy after users discovered that trading firm Alameda Research, a company run by Caroline Ellison — a former love interest of Bankman-Fried, had allegedly been using consumer funds from FTX to make investments.
During the hearing held by the committee, which was attended virtually by The Daily Wire, lawmakers repeatedly pushed the need for regulation through the Digital Commodities Consumer Protection Act, a piece of legislation that would eliminate conflicts of interest and extend other protections to the cryptocurrency sector.
Ranking Member John Boozman (R-AR) emphasized that the committee should consider the regulation of cryptocurrencies because of the entity’s responsibility to execute “oversight of the nation’s commodity markets.” He said that digital assets such as bitcoin are regulated as commodities, a reality that federal courts have broadly recognized.
Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam, a former senior counselor to Senate Agriculture Committee Chairwoman Sen. Debbie Stabenow (D-MI) and the sole regulator offering testimony, told lawmakers in his opening statement that “nominal barriers to entry for new products and new consumers” in the cryptocurrency market have “taken the place of legitimate market forces” and placed the public at “significant risk.” He expressed support for the Digital Commodities Consumer Protection Act as a step in the right direction toward regulating the industry.
“For years many have recognized that a patchwork of federal and state-based regulation is an unsuitable substitute for a comprehensive approach,” he remarked. “We are here today because many Americans invested in a novel product and will likely lose money because digital asset markets lack the basic protections that we have all come to expect and have made American financial markets the envy of the world.”
LedgerX, a derivatives platform acquired by FTX last year, had extensive communication with the CFTC regarding the company’s push to become a registered derivatives clearinghouse. Behnam said that he personally met with Bankman-Fried 10 times over the past 14 months to discuss the application out of a “dogged desire” to ensure that the initiative would be properly scrutinized.
Sen. Cory Booker (D-NJ), a co-sponsor of the Digital Commodities Consumer Protection Act, denied that Bankman-Fried had an undue influence over the bill.
Bankman-Fried, a top contributor to Democratic and Republican campaigns, has repeatedly insisted that he did not intentionally commingle funds between FTX and Alameda Research. The disgraced entrepreneur attempted with little success to raise as much as $8 billion from new investors to reimburse defrauded users of the company, which is based in the Bahamas.
FTX had received stellar corporate governance ratings from agencies considering the venture’s environmental, social, and governance (ESG) qualifications, even though Bankman-Fried later admitted that his professed status as an “effective altruist” was largely a ruse to win the trust of “woke westerners.” Behnam expressed openness to discussing regulations upon ESG ratings in the cryptocurrency space when pressed on the matter by Sen. Tommy Tuberville (R-AL).
FTX spent extensively to recruit celebrity brand ambassadors, such as Tampa Bay Buccanneers quarterback Tom Brady and supermodel ex-wife Gisele Bündchen, many of whom participated in mass-market advertisements. Sen. Amy Klobuchar (D-MN) asserted that such marketing efforts stoke “fears of missing out” among unwitting consumers, prompting Behnam to remark that advertisements must ensure “investors understand the risk of the underlying asset.”
Sen. Roger Marshall (R-KS) noted that the use of cryptocurrency to support criminal enterprises has enabled the fentanyl crisis and other national security concerns, asking whether a pause on the digital asset sector in the United States would be feasible. Behnam noted that a significant number of Americans would nevertheless gain access to overseas cryptocurrency markets.