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Senators call for criminal investigation of FTX founder Sam Bankman-Fried

United States Senators Elizabeth Warren and Sheldon Whitehouse asked the Department of Justice (DOJ) to hold former FTX CEO Sam-Bankman Fried and any complicit FTX executives personally accountable for wrongdoing following the cryptocurrency exchange’s swift collapse.

In early November, FTX, one of the world’s-largest crypto platforms, announced that it and more than 130 additional affiliated companies had filed for bankruptcy.

The DOJ should act on the lawmakers’ request, according to Lisa McCormick, a progressive Democrat who has advocated stronger cryptocurrency regulation.

“The Biden administration must establish clear rules for the growing cryptocurrency industry to protect consumers,” said McCormick about a year ago. “If digital currency can’t be stopped, then it must be regulated so a responsible regulatory mechanism should be put in place.”

Elizabeth Warren, Sheldon Whitehouse and Lisa McCormick

“Given the department’s commitment to holding perpetrators of white-collar crime personally accountable, we expect DOJ to investigate the actions leading to the collapse of FTX with the utmost scrutiny,” wrote the senators in a letter addressed to Attorney General Merrick Garland.

This collapse has left hundreds of thousands of retail investors unable to access their funds and triggered a contagion across the industry. New and devastating details about FTX’s operations continue to emerge, including disturbing allegations of fraud and illicit behavior by FTX executives.

John Jay Ray, FTX’s new CEO who previously managed Enron’s bankruptcy, stated that he has never seen “such a complete failure of corporate control.”

“Nobody could have foreseen the collapse of cryptocurrency exchange FTX, unless they had one or more of our ordinary five senses,” said McCormick after the collapse. “After all, cryptocurrency is backed by the full faith and credit of absolutely nothing.”

“The fall of FTX was not simply a result of sloppy business and management practices, but rather appears to have been caused by intentional and fraudulent tactics employed by Mr. Bankman-Fried and other FTX executives to enrich themselves,” wrote Warren and Whitehouse. “In fact, Mr. Bankman-Fried had already revealed his true interests of self-enrichment last year when he siphoned $300 million to his own wallet, an investment that was intended to ‘help grow (FTX), improve user experience and allow it to engage more with regulators.’”

Amid the breakdown, troubling allegations surfaced that Sam Bankman-Fried built a backdoor into FTX’s accounting processes that allowed him to secretly move billions of FTX customer funds out of FTX and into his trading firm, Alameda Research.

There have also been reports that Bankman-Fried misled customers about the safety of their funds, and that FTX executives did not have appropriate records and security controls in place to track customer funds.

“As this situation unfolds, new facts will undoubtedly shed new light on how Bankman-Fried and his associates’ deception has harmed FTX’s customers, and customers of any company that was exposed to the contagion – and may reveal that the problems with the crypto industry extend well beyond FTX,” wrote Warren and Whitehouse.

The lawmakers point to DOJ’s recent commitment to “(hold) individuals accountable for white-collar crime, as opposed to only levying fines on companies” and “to increase its focus on the flesh-and-blood victims of white-collar wrongdoing.”

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