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U.S. Regulators May Face Scrutiny Over FTX Links

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  • November 19, 2022

Key Takeaways

  • FTX’s collapse has raised suspicions about why regulators could not see the fraud coming.
  • FTX filled key positions with former regulators with ties to both the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC).
  • Critical momentum is gathering against Sam Bankman-Fried and those caught in his orbit.

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FTX’s ties to political and regulatory figures—especially those who have received donations from its principal executives—have raised suspicions.

Scrutiny for U.S. Regulators

Several former U.S. regulators, including commissioners of the Commodity Futures Trading Commission (CFTC), later took roles within FTX, leading to suspicion of impropriety.

While the hiring of formed CFTC personnel is legal, the appointments have raised eyebrows following the total collapse of FTX. Three, in particular, stand out.

In August 2021, FTX hired former CFTC attorney Ryne Miller as General Counsel for FTX.US. Miller joined the CFTC as an attorney in 2010, where he served for two years before becoming Legal Counsel to then CFTC Chair Gary Gensler in May 2012. Miller left this role in September 2013. In April 2021, Gensler became SEC Chair. 

In November 2021, FTX appointed former CFTC Commissioner Mark Wetjen as Head of Policy and Regulatory Strategy to “lead the Company’s communications with U.S. regulatory and legislative bodies, such as the CFTC, SEC and various House and Senate Committees.” Wetjen became Acting Chair of the CFTC after Gary Gensler left the body. He held the position for five months.

Finally, in September 2022, former CFTC Commissioner Jill Sommers joined the board of FTX US Derivatives. Somers promised to work closely with regulators and “to further establish FTX US Derivatives as the premier regulated crypto derivatives trading platform.” Somers also worked as Policy Director and Head of Government Affairs for the International Swaps and Derivatives Association (ISDA) and as the Managing Director of Regulatory Affairs for the Chicago Mercantile Exchange.

Other Connections

Meanwhile, the wider crypto community is focusing its ire on SEC Chair Gary Gensler.

It has become widely known that Bankman-Fried has ties to Gensler through Caroline Ellison, who he appointed CEO of Alameda Research; Ellison’s father is Glenn Ellison, Gensler’s former colleague at MIT. On Wednesday, Crypto Briefing reported that angry community members had written over 9,000 letters to Congress demanding an investigation into the SEC chair.

Other family connections to prominent figures exist as well. Joseph Bankman, Bankman-Fried’s father, has worked on legislation with Elizabeth Warren, for example. His mother, Barbara Fried, leads Mind the Gap, a left-leaning lobby group responsible for major donations to the Democrat party.

In 2020, Bankman-Fried donated $5.2 million to Joe Biden’s Presidential campaign, making him the President’s second biggest political donor, and he’s given liberally to other left-leaning campaigns. Meanwhile, Ryan Salame, Co-CEO of FTX Digital Assets, was a heavy Republican donor, giving roughly $36 million to right-wing candidates through personal and Super PAC donations in 2022.

Lawmakers on both sides of the aisle have begun renouncing donations received from FTX and contributing those amounts to charity.

Crypto Briefing’s Take

From the outside looking in, it appears Bankman-Fried and his associates could hardly have tried harder to court politicians, regulators, and powerbrokers without offering them their luxury penthouses in the Bahamas. Over a week since FTX imploded, Bankman-Fried is facing a major crisis and repeated calls to face jail time from crypto enthusiasts. His habit of cozying up to regulators and policymakers has only raised suspicions and anger across a community that’s still looking for answers, and now that he’s been exposed for the crook that he is, the nature of his networks will undoubtedly come to light.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other crypto assets.

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