Crypto News / Cryptocurrency / Regulation · November 18, 2022

Senator Warren Demands Details About FTX’s Books

A number of US lawmakers have lashed out at the collapsed FTX crypto exchange and its leadership. Senator Elizabeth Warren is also one of them.

She has called on the leadership of the company to share the financial books that would give insight into the company’s practices.

The demand

On Wednesday, both Senator Warren, as well as Senator Dick Durbin, sent a letter to the co-founder and former CEO of FTX, Sam Bankman-Fried, as well as the current CEO John Jay Ray III.

The two demanded that they provide FTX’s full balance sheets that date back to 2019, along with those of its 134 other affiliates that have also filed for bankruptcy.

The letter said that the new details continue to show that this was just a case of deception and greed. Therefore, the company owes the public complete transparency in terms of its business and accounting practices.

They demanded that it disclose its financial activities up until the day of its bankruptcy which resulted in losses for customers worth billions of dollars.

The chairman of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) had also been copied on the letters.

Clarification

The Senators said that not only should the companies provide their balance sheets, but also provide clarification regarding the ‘poor internal labeling’ cited by Bankman-Fried.

The former CEO had claimed last week in a tweet that this system was the reason why he had not been able to understand the liquidity and finances of the exchange.

Moreover, even though Sam Bankman-Fried had continued to exist that FTX and Alameda Research, the trading desk, were two separate entities, there has been speculation that it was not the case.

The Senators demanded that they also confirm if a ‘back door’ had indeed existed between the two companies.

The details

The newly appointed CEO of FTX, John Ray disclosed in a court filing that Alameda had an exemption that would keep it safe from auto-liquidation on FTX.

To put it simply, it means that Alameda played on the grounds of FTX, but made up its own rules. Warren also demanded that the exchange provide clarification regarding customer funds worth $1.7 billion that are missing.

The Senators demanded that Sam Bankman-Fried reveal which other employees were responsible for making decisions.

The letter from the senators said that billions of dollars worth of customer funds have disappeared into thin air, which is evidence that the crypto industry benefits scammers.

Criticism

Senator Warren has never been a fan of the crypto industry and last week, she tweeted that the collapse of FTX only validated her opinion.

She also said that it highlighted why regulation from the federal government was so important for the crypto space.

She said that ordinary people need to be protected and they have to come up with stronger rules in order to do so.

She does not appear to be wrong in this regard, as more truths about FTX’s fiasco continue to come to light.