House lawmakers have dozens of questions for former FTX CEO Sam Bankman-Fried, whose cryptocurrency empire went bankrupt last month amid allegations of fraud.
The first one is whether he’ll actually show up to answer them.
The leaders of the House Financial Services Committee are pushing Bankman-Fried to testify at a Dec. 13 hearing about the FTX collapse and speak to his role in the company’s decline.
In a series of coordinated tweets, Chairwoman Maxine Waters (D-Calif.) and ranking member Patrick McHenry (R-N.C.) have urged Bankman-Fried to bring his international apology tour to the Capitol — either in person or remote from his abode in the Bahamas. After spending weeks giving high-profile interviews, they argue the least Bankman-Fried could do is talk to the lawmakers responsible for cleaning up FTX’s mess.
But Bankman-Fried has suggested he won’t be there, arguing he needs more time to understand how FTX imploded, despite frequently discussing the issue on Twitter and with journalists.
“Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain. I’m not sure that will happen by the 13th. But when it does, I will testify,” Bankman-Fried tweeted Friday in response to Waters and McHenry’s efforts.
Waters, however, didn’t buy it.
“Based on your role as CEO and your media interviews over the past few weeks, it’s clear to us that the information you have thus far is sufficient for testimony,” Waters said in a Monday tweet to Bankman-Fried.
“The collapse of FTX has harmed over one million people. Your testimony would not only be meaningful to Members of Congress, but is also critical to the American people.”
What happened to FTX?
Over a three-day span, FTX customers attempted to withdraw billions of dollars in deposits stored on the platform, but the company did not have enough cash to make its customers whole. Once worth $32 billion, FTX and its various affiliates — including Bankman-Fried’s investment firm, Alameda Research — filed for bankruptcy in November.
While Bankman-Fried has pleaded ignorance to the Financial Service panel, he’s admitted to several missteps and potentially illegal conduct that laid the groundwork for FTX’s collapse.
Bankman-Fried said he and FTX leaders lacked basic information about the amount of money it owed to customers and how much hard cash it had to back up its obligations. He also said FTX sent money held by customers on its exchange to fund Alameda’s investments — many of which failed — even though FTX promised users it would not use customer money for such purposes.
“As you said … you have a duty to ‘try to do what’s right’ and to ‘help customers out here,’” McHenry tweeted at Bankman-Fried last week.
“If this is a true statement, testify before the House Financial Services Committee.”
Both Waters and McHenry argue Bankman-Fried’s testimony is essential to the Financial Services panel’s oversight of financial markets and domain over cryptocurrency regulation.
What Bankman-Fried’s testimony could bring
While Democrats and Republicans often spar over the issue, both sides agree there are serious gaps in the way the federal government oversees and regulates digital tokens, the companies behind them and the platforms used to hold and trade crypto.
“If you have him [testify], it could be helpful in determining some of the things that you want to do and legislation going forward,” said Ian Katz, director at research consultancy Capital Alpha Partners, in a Monday interview.
“Though he’s already talked so much, that information may already be known,” Katz added.
Bringing Bankman-Fried before a House panel would also require him to testify about the FTX collapse under oath. While Congress cannot bring criminal charges against an individual, it can share potentially incriminating material with regulators and law enforcement investigating FTX.
It is also illegal to lie in sworn testimony to Congress, which raises the stakes of Bankman-Fried’s potential appearance. While prosecutors could still seize on what Bankman-Fried has said in media interviews, his comments to reporters lack the same legal risks.
“There’s obviously a legal and regulatory risk for appearing. Members will want to ask a variety of questions, some of which would be aimed at maybe helping a regulatory or law enforcement case,” said Jason Rosenstock, partner at lobbying firm Thorn Run Partners, in a Monday interview.
“But these hearings are very infrequently like depositions,” he added. “You have a few members who are lawyers on both sides of the aisle, but not a lot who are prosecutors, so the questioning sometimes is less nuanced than you might get in a legal deposition.”
Bankman-Fried’s potential appearance before the Financial Services panel may not yield the smoking gun or devastating admission some lawmakers and prosecutors are seeking. If nothing else, lawmakers will get to enjoy a congressional pastime: blasting a disgraced CEO on live television while pitching their own legislative responses to the issue at hand.
“They have to show that they’re upset,” Katz said. “They have to show that they’re defending consumers. They have to show that they’re defending investors. They have to show that they are working to not let this sort of thing happen again.”