The hottest topic out right now is the crypto crash that erased almost $200 billion from the industry’s total market capitalization. The crash followed the bankruptcy filing of one of the industry’s largest exchanges, FTX, co-founded by CEO Sam Bankman-Fried.
In the wake of the company’s bankruptcy, which left many investors with the only option to write their investments off as losses, there have been calls from legislators and the treasury secretary to regulate cryptocurrency to ensure that the abuses perpetuated by FTX does not leave investors without security.
“It shows the weaknesses of this entire sector,” Yellen told Bloomberg News.
“In other regulated exchanges, you would have segregation of customer assets,” she said. “The notion you could use the deposits of customers of an exchange and lend them to a separate enterprise that you control to do leveraged, risky investments—that wouldn’t be something that’s allowed.”
Bankman-Fried is currently being investigated by the Commodity Futures Trading Commission (CFTC) and the Securities Exchange Commission (SEC) after moving $10 billion of his clients’ assets stored within his exchange into his trading firm Alameda Research. The move caused a liquidity crisis that eventually led to the company filing for bankruptcy, according to The Daily Caller.
Being investigated by the CFTC, which is tasked with regulating the crypto marketplace, appears curious because Bankman-Fried reportedly donated to ranking members from the Senate and House Agriculture Committees overseeing the agency. The Senate has the power to approve CFTC commissioners who are nominated by the president.
Bankman-Fried reportedly donated a total of $37 million to Democrats during the last election cycles, making him the party’s the second-largest donor—second only to George Soros. Of that money, $27 million went to Democratic political action committee (PAC) Protect Our Future, which then spent over $1 million funding Democratic Ohio Rep. Shontel Brown, a member of the House Agriculture Committee, Long Beach, California Mayor Robert Garcia and North Carolina Rep. Valerie Fouschee.
The former CEO is also listed as the GOP’s tenth largest donor, spending $19 million on Republican candidates, such as Republican Arkansas Sen. John Boozman and Republican North Dakota Sen. John Hoeven, ranking member of the Subcommittee on Commodities, Risk Management and Trade.
Bankman-Fried funneled money into the CFTC’s Senate committee’s chairwoman, Democratic Michigan Senator Debbie Stabenow, “contributing over $20,000 to the Stabenow Victory Fund and $5,800 to her campaign for Senate,” The Daily Caller reported.
FTX is not only tied to politicians sitting on the CFTC, but also to Ukraine.
Shortly after Russia launched its “special military campaign,” The Washington Post reported in early March that Ukraine had been accepting crypto donations, securing more than $60 million from all over the world, including a “large sum” from Bankman-Fried. Although it had tens of millions coming in at the start of the war, the challenge was how the government was going to convert that digital currency into fiat.
That’s when Bankman-Fried reportedly announced that FTX is supporting the Ukrainian Ministry of Finance and other communities to reportedly collect crypto donations on their behalf.
“FTX has stressed across all of its regulatory and policy efforts, active coordination and communication with regulators and policymakers is crucial to ensuring that laws and rules achieve their intended outcome,” a letter by FTX states.
Many outlets are using this information to claim that the financial aid provided by the U.S. was invested by Ukraine into FTX, which then funneled that money in Democratic campaigns. “Fact-checkers” are taking Ukraine’s word and denying this transpired.
Alex Bornyakov, Ukraine’s deputy minister of digital transformation, claimed that Ukraine only used the exchange to convert cryptocurrency into fiat, but was not in on a scheme to give money to Democratic politicians who were on the floor of Congress urging to provide the country with tens of billions of taxpayer dollars to help in the fight for democracy against Russia.