FTX, Bankman-Fried to Face Congressional Scrutiny Over Collapse

(Bloomberg) -- Bankrupt crypto exchange FTX and its former chief executive officer, Democratic mega-donor Sam Bankman-Fried, will be in congressional cross hairs next month as House and Senate panels probe the company’s collapse.

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The House Financial Services and Senate Banking committees plan December hearings that will look at FTX’s sudden demise and its ripple affects in the broader digital asset industry. Democrats and Republicans alike have expressed anger about the current state of the crypto marketplace.

“They really haven’t justified why they exist,” Banking Chair Sherrod Brown said Wednesday about the crypto industry. “It’s sort of a scam in too many cases.”

Brown said he particularly wants to hear from the US Securities and Exchange Commission and other industry regulators in his panel’s hearing. Both Republicans and Democrats say the FTX collapse points to mismanagement and a lack of oversight of the crypto industry.

Financial Services Chair Maxine Waters said she would seek testimony from Bankman-Fried, his trading house Alameda Research, rival exchange Binance, as well as other FTX employees. In a rare show of bipartisanship, Waters announced the hearing alongside her GOP counterpart, Patrick McHenry, blasting FTX for posing “tremendous harm.” They pledged to hold “bad actors” accountable.

Despite the cross-party fervor for oversight, GOP members have been quick to note Bankman-Fried’s nearly $40 million in contributions in the midterms, making him Democrats’ second-largest donor.

“The ‘effective altruism’ that Democrat megadonor Sam Bankman-Fried peddled is perfectly in line with the radical left’s efforts to redefine a corporate purpose,” Representative Andy Barr, a Kentucky Republican, said. “The House Financial Services Committee will work to expose any impropriety that led to this historic collapse.”

The hearings are the latest in a series of bad news for Bankman-Fried, an American who lives in the Bahamas. American and Bahamian authorities have been discussing the possibility of bringing him to the US for questioning.

Representative Tom Emmer, who will be a member of House Republican leadership in the next Congress, said he’s not jumping to conclusions about Bankman-Fried.

“I want to wait and see what the facts are,” he told reporters after speaking at a Blockchain Association event in Washington. “It doesn’t look good, but I’m not going to pass judgment until we see what the details are.”

Since FTX filed for bankruptcy earlier this month, other companies with exposure to the exchange have announced financial strain, including BlockFi Inc. and Voyager Digital Ltd.

This round of hearings is not likely to be the last on the topic. Francesco Castella, senior policy advisor to Financial Services member Ted Budd, said at the Blockchain Association event that he expects there will be additional hearings on the FTX fallout next year.

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