CD265: Policing FTX

FTX, at one point the world's third largest cryptocurrency exchange, went bankrupt, causing the entire cryptocurrency industry to crash. In this episode, hear highlights from Congressional testimony that will explain how FTX was able to grow so large while committing blatant fraud, how it's possible that the government didn't know and didn't do anything to stop it, and hear about a Senate bill that's branded as a solution but has concerning flaws of it's own. Please Support Congressional Dish – Quick Links Contribute monthly or a lump sum via PayPal Support Congressional Dish via Patreon (donations per episode) Send Zelle payments to: Donation@congressionaldish.com Send Venmo payments to: @Jennifer-Briney Send Cash App payments to: $CongressionalDish or Donation@congressionaldish.com Use your bank's online bill pay function to mail contributions to: 5753 Hwy 85 North, Number 4576, Crestview, FL 32536. Please make checks payable to Congressional Dish Thank you for supporting truly independent media! View the show notes on our website at congressionaldish.com/cd265-policing-ftx Background Sources Recommended Congressional Dish Episodes CD264: Cryptocurrencies and Blockchain CD235: The Safe Haven of Sanctions Evaders What is FTX? "What is FTX?" Timothy Smith. Dec 22, 2022. Investopedia. Crypto Regulation "U.S. Senate Is Still Confused About How to Regulate Crypto After FTX Collapse." Kyle Barr. Dec 1, 2022. Gizmodo. "Congressmembers Tried to Stop the SEC's Inquiry Into FTX." David Dayen. Nov 23, 2022. The American Prospect. "We Already Have Laws to Stop Crypto Fraud." David Dayen. Nov 17, 2022. The American Prospect. "Why Is Congress Still Writing Crypto Regulations?" David Dayen. Nov 10, 2022. The American Prospect. "Letter to SEC Chair Gary Gensler Regarding Cryptocurrency Inquiries." Tom Emmer et al. Mar 16, 2022. "Letter to SEC Chair Gary Gensler Regarding Cryptocurrency Inquiries." emmer.house.gov. Lead-up to FTX Collapse "In about-face, Crypto exchange Binance pulls out of FTX acquisition." Elizabeth Napolitano. Nov 9, 2022. NBC News. "Crypto exchange FTX saw $6 bln in withdrawals in 72 hours." Tom Wilson and Angus Berwick. Nov 8, 2022. Reuters. "Crypto exchange FTX saw $6 bln in withdrawals in 72 hours." Tracy Wang and Oliver Knight. Nov 6, 2022. "Binance to Sell Rest of FTX Token Holdings as Alameda CEO Defends Firm's Financial Condition." Tracy Wang and Oliver Knight. Nov 6, 2022. CoinDesk. "Divisions in Sam Bankman-Fried's Crypto Empire Blur on His Trading Titan Alameda's Balance Sheet." Ian Allison. Nov 2, 2022. CoinDesk. "Re: Potential Violations of Section 18(a)(4) of the Federal Deposit Insurance Act." Seth. P Rosebrock, Assistant General Counsel, Enforcement, FDIC. Aug 18, 2022. FDIC. Tom Emmer "SEC Chair Gary Gensler Must Testify Before Congress, Says Rep. Tom Emmer." André Beganski. Dec 11, 2022. Decrypt. "Meet Tom Emmer, a powerful crypto advocate in a crypto-wary Congress." Tony Romm. Dec 8, 2022. The Washington Post. "House GOP picks Emmer as GOP whip, Scalise as leader." Emily Brooks and Mychael Schnell. Nov 15, 2022. The Hill. FTX Collapse "FTX Effort to Save Itself Failed on Questionable Assets." Shane Shifflett, Rob Barry, and Coulter Jones. Dec 5, 2022. The Wall Street Journal. "FTX Founder Sam Bankman-Fried Says He Can't Account for Billions Sent to Alameda." Alexander Osipovich. Dec 3, 2022. The Wall Street Journal. "5 major revelations about the collapse of crypto giant FTX." David Gura. Nov 23, 2022. NPR. "FTX says it owes more than $3 billion to creditors." Steven Zeitchik. Nov 20, 2022. The Washington Post. "Declaration of John J. Ray III in Support of Chapter 11 Petitions and First Day Pleadings" [Case 22-11068-JTD] Nov 17, 2022. PACER. "Exclusive: At least $1 billion of client funds missing at failed crypto firm FTX." Angus Berwick. Nov 11, 2022. Reuters. "FTX chief Sam Bankman-Fried resigns as firm files for bankruptcy." Jacob Bogage and Tory Newmyer. Nov 11, 2022. The Washington Post. "FTX Tapped Into Customer Accounts to Fund Risky Bets, Setting Up Its Downfall." Vicky Ge Huang, Alexander Osipovich, and Patricia Kowsmann. Nov 11, 2022. The Wall Street Journal. Lobbying and Campaign Donations "Lawmakers who benefited from FTX cash probe its collapse." Tory Newmyer and Steven Zeitchik. Dec 1, 2022. The Washington Post. "Inside Sam Bankman-Fried's courtship of a Washington regulator." Tory Newmyer and Peter Whoriskey. Nov 28, 2022. The Washington Post. "Congress took millions from FTX. Now lawmakers face a crypto reckoning." Tony Romm. Nov 17, 2022. The Washington Post. "FTX Collapse Sets Back Crypto Agenda in Washington." Paul Kiernan. Nov 14, 2022. The Wall Street Journal. "Washington lobbyists sever ties with FTX founder Sam Bankman-Fried after crypto exchange implodes." Brian Schwartz. Nov 14, 2022. CNBC. "Sam Bankman-Fried charmed Washington. Then his crypto empire imploded." Tory Newmyer. Nov 12, 2022. The Washington Post. "Meet the mega-donors pumping millions into the 2022 midterms." Luis Melgar et al. Oct 24, 2022. The Washington Post. "A young crypto billionaire's political agenda goes well beyond pandemic preparedness." Freddy Brewster. Aug 12, 2022. Los Angeles Times. Aftermath of the FTX Collapse "Factbox: Global regulatory actions against FTX." Dec 12, 2022. Reuters. "FTX Founder Sam Bankman-Fried Is Said to Face Market Manipulation Inquiry." Emily Flitter, David Yaffe-Bellany and Matthew Goldstein. Dec 7, 2022. The New York Times. "Clashes Over FTX Bankruptcy Go Global." Alexander Osipovich, Alexander Saeedy and Alexander Gladstone. Dec 4, 2022. "Hot Wallets vs. Cold Wallets." Mar 10, 2022. Cryptopedia. December 13 Hearing "Memorandum To: Members, Committee on Financial Services From: FSC Majority Staff Subject: December 13, 2022, Full Committee Hearing entitled, "Investigating the Collapse of FTX, Part I." Dec 8, 2022. House Financial Services Committee. "Chart: Four Silos for Recover Purposes." House Financial Services Committee. Sam Bankman-Fried Indictment "Here is the criminal indictment against Sam Bankman-Fried." Dec 13, 2022. The New York Times. Bills S.4760 - Digital Commodities Consumer Protection Act of 2022 Audio Sources Investigating the Collapse of FTX, Part I December 13, 2022 House Committee on Financial Services Witness: John J. Ray III, CEO, FTX Group Clip Transcripts Rep. Emanuel Cleaver (D-MO): Have you read the full testimony that was planned by our missing guest [Sam Bankman-Fried]? John Ray I have not read his full testimony. Some pieces of it been relayed to me, but I've not read it. I've not read one word of it actually. Rep. Emanuel Cleaver (D-MO): Yeah, I don't know him personally and probably don't want to. But this testimony is so disrespectful. I mean, there's not a person up here would like to show this to their children. In line two of this message, he says, and I quote, "I would like to start out by firmly stating under oath...* And yeah, I can't even say it publicly. The next two words, absolutely insulting. This is the Congress of the United States. Rep. Warren Davidson (R-OH): So when when customers deposited funds into their FTX accounts, where did the cash go? John Ray: Well, sometimes the money wasn't deposited in the FTX account it was sent to Alameda to begin with. Rep. Warren Davidson (R-OH): It was misdirected from from the start straight to Alameda. John Ray: There was certainly some time period where there's no bank account at .com and then ultimately, if you look at the structure of this, Alameda is essentially a customer on that .com exchange, and effectively, you know, borrowed money from or just transferred money from FTX customers to take its own positions on the Alameda hedge fund. Rep. Patrick McHenry (R-NC): So Alameda research and the venture capital business, what did Alameda research do? John Ray: Essentially made crypto investments, engaged in margin trading, took long and short positions in crypto, essentially invested in crypto. But of …