As FTX teeters on the brink of collapse, former CEO Sam Bankman-Fried has fallen out of favor as the industry “darling” in Washington and drawn scrutiny from regulators and lawmakers in both parties.
Bankman-Fried, who was a regular presence on Capitol Hill over the past year as an industry advocate, tweeted on Thursday that he was sorry. “I f—ed up, and should have done better,” he said.
Bankman-Fried stepped down as CEO of the cryptocurrency exchange he founded, and FTX filed for Chapter 11 bankruptcy protection, the company announced Friday.
The company’s implosion has led the Biden White House and two powerful Democratic committee chairs to publicly criticize FTX and call for tighter oversight of the broader industry.
Excluding the cryptocurrency exchange’s U.S. business, Bankman-Fried tweeted that the company’s international operation has a total market value of assets and collateral that is higher than client deposits, but he said that is “different from liquidity for delivery — as you can tell from the state of withdrawals.”
Binance, a separate cryptocurrency exchange, announced on Wednesday that they were backing out of acquiring FTX “as a result of corporate due diligence, as well as the latest news reports regarding mishandled customer funds and alleged U.S. agency investigations.” The Securities and Exchange Commission and the Department of Justice are reportedly investigating FTX for civil and criminal violations of securities laws.
Rep. Maxine Waters, D-Calif., the chair of the House Financial Services Committee, is considering opening a congressional inquiry, even possibly calling Bankman-Fried to the Hill to testify about the company’s near collapse in the coming weeks, according to a committee aide who requested anonymity to discuss private deliberations. Democrats are at risk of losing control of the House in January, depending on the outcome of several key races that haven’t been called yet.
“Now more than ever, it is clear that there are major consequences when cryptocurrency entities operate without robust federal oversight and protections for customers,” Waters said in a statement Thursday.
If the House flips to Republicans, Rep. Patrick McHenry, the current GOP committee ranking member, will likely become the chairman, but it’s unclear what McHenry do. The Crypto Innovation PAC, which is financed in part by a separate group that saw millions in donations from Bankman-Fried, backed McHenry’s successful 2022 reelection campaign. The FTX CEO donated over $30 million toward the 2022 midterms, according to Federal Election Commission records.
However, he indicated the need for legislation to rein in the industry after Binance announced they would acquire the company to help stave off a liquidity crunch.
“The recent events show the necessity of Congressional action,” McHenry said in a statement Tuesday. “It’s imperative that Congress establish a framework that ensures Americans have adequate protections while also allowing innovation to thrive here in the U.S.”
Late last year, Bankman-Fried told lawmakers at a hearing: “There are irresponsible actors in the digital-asset industry, and those actors attract the headlines, but FTX is not one of them and in fact has built a resilient, risk-reducing platform as a competitive advantage.”
Rep. Jim Himes, D-Conn., a member of the House Financial Services Committee, said it’s clear Bankman-Fried will lose his access to lawmakers on Capitol Hill as investigators uncover what happened.
“Now you see the Washington darling, who knew people, mainly Democrats, and that persona, just evaporate,” Himes said. When asked what Bankman-Fried was like to meet with, Himes said “he was your classic founder. Nerdy genius and you assumed he had twice the IQ you did.”
Sen. Sherrod Brown, D-Ohio, the chair of the influential Senate Banking Committee called on regulators to look into what happened at FTX.
“It is crucial that our financial watchdogs look into what led to FTX’s collapse so we can fully understand the misconduct and abuses that took place,” Brown said in a statement.
White House Press Secretary Karine Jean-Pierre told reporters Thursday the near collapse of FTX proves more regulation is needed.
“The most recent news further underscores these concerns and highlights why prudent regulation of cryptocurrencies is indeed needed,” Pierre said. “The White House, along with the relevant agencies, will again closely monitor the situation as it develops.”
Bankman-Fried donated $5 million during the 2020 election to a super PAC that supported then candidate Joe Biden as he took on former President Donald Trump.