NJ Congressman tried to scuttle SEC probe into crooked cryptocurrency firm

Congressman Josh Gottheimer, was widely known as former President Donald Trump's favorite Democrat in the House of Representatives.

Unlike dollars and coins, cryptocurrencies are not issued or backed by any government or central bank, so users who invest a great deal of trust stand to lose big when their fake money runs into problems such as the massive meltdown at FTX.

The Securities Act affords broad protection to investors, a policy that is not to be thwarted by unrealistic and irrelevant construction but instead of creating a regulatory framework to safeguard consumers, Rep. Josh Gottheimer was among a bipartisan group of eight federal lawmakers who tried to slow down an investigation by the Securities and Exchange Commission into the collapsed cryptocurrency exchange FTX.

The effort to obstruct the probe came while FTX CEO Sam Bankman-Fried and his associate, Ryan Salame, were spending more than almost anyone else on political contributions for the US midterm elections.

On March 16, the bipartisan group of congressmen decided to weigh in on the Securities and Exchange Commission’s investigation into cryptocurrency and blockchain companies by sending a letter SEC chair Gary Gensler that demanded the regulatory agency “provide us with a better understanding of the SEC’s authority” instead of working as lawmakers to pass rules governing the corrupt industry.

“It appears there has been a recent trend towards employing the Enforcement Division’s investigative functions to gather information from unregulated cryptocurrency and blockchain industry participants in a manner inconsistent with the Commission’s standards for initiating investigations,” wrote the crypto congressmen now known as the Blockchain Eight. “We have reason to believe these requests might be at odds with the Paperwork Reduction Act (PRA).”

Gottheimer’s concern about subjecting criminals to excessive paperwork is not surprising, since he collected $4,837,715 from the securities industry during his career in Congress, according to OpenSecrets, the nation’s premier research group tracking money in U.S. politics and its effect on elections and public policy.

Gotthiemer proposed legislation giving the Office of the Comptroller of the Currency (OCC) primary oversight authority over crypto regulation while putting taxpayers in jeopardy by subjecting investments to the Federal Deposit Insurance Corporation (FDIC).

“I’m releasing the Stablecoin Innovation and Protection Act to encourage cryptocurrency innovation in the United States,” said Gottheimer in a February 15, 2022, press release.

“The expansion of cryptocurrency offers tremendous potential value for our economy,” said Gottheimer, a member of the House Financial Services Committee who was widely known as former President Donald Trump’s favorite Democrat in the House of Representatives.

Consumer advocates who want the stronger SEC to be the regulatory agency designated to police crypto because they believe digital tokens meet the definition of a security under the Supreme Court’s 1946 Howey test, asserting that, “the investing public is buying or selling crypto security tokens because they’re expecting profits derived from the efforts of others in a common enterprise.”

Emmer was the head of the GOP campaign committee at the time when the Congressional Leadership Fund, a super PAC dedicated to electing Republicans to the House of Representatives received $2.75 million from FTX.

It turns out that the SEC should have been more dogged in its pursuit, since Bankman-Fried’s $16 billion fortune was wiped out almost overnight in what is being called the largest ever single-day collapses among billionaires.

Bankman-Fried, in what is called ‘the understatement of 2022’, said, “I’ve had a bad month” and that he “didn’t do a good job” meeting his responsibilities to regulators, customers and investors in a conversation with journalist Andrew Ross Sorkin at the DealBook Summit.

Sales of securities are regulated by the SEC while the Commodities Futures Trading Commission regulates the U.S. derivatives markets, which includes futures, swaps, and certain kinds of options.

Cybercurrency dealers have sought to place cryptocurrency under the purview of the Comptroller of the Currency (OCC), an independent bureau within the United States Department of the Treasury that regulates and supervises about 1,200 national banks and federally-licensed savings associations.

The SEC and CFTC are much stronger and better staffed than the OCC.

The cryptocurrency technology, which enables new forms of digital money that are resistant to centralized control, has experienced explosive growth amid complaints of tax evasion and money laundering.

American politicians are trying to preserve the right of con artists to lure consumers into risky investment ventures, but other nations have taken steps to protect citizens.

Nine countries have banned cryptocurrency and the risk of theft from hacking and fraud along with its facility for illegal purposes makes that an entirely responsible course of action, but since Americans have replaced elections with auctions, free-spending tycoons have successfully sought to influence lawmakers away from responsible policy.

Bankman-Fried once claimed that he would spend up to $1 billion through the 2024 presidential election while playing would-be kingmaker to mostly Democratic candidates.

Bankman-Fried later walked back that figure, though recent estimates placed his midterm spending at roughly $40 million.

Protect our Future is a Carey Committee Super PAC funded by Sam Bankman-Fried and dark money funneled through Nevada companies, and used to advance the political interests of the FTX cryptocurrency exchange in influencing US regulation in favor of the crypto industry.

FTX’s downfall was the latest in a series of cryptocurrency collapses, with previous meltdowns including the TerraUSD stablecoin and the crypto hedge fund Three Arrows Capital.

About 16% of U.S. adults say they personally have invested in, traded or otherwise used cryptocurrencies like Bitcoin or Ether, according to a Pew Research Center survey.

While Democrats have been more likely to call for stronger cryptocurrency oversight than more Republicans, who have embraced the bogus money technology, the issue is scrambling partisan lines.

California Democrat Brad Sherman, the most prominent critic of cryptocurrency in the House,

The Crypto Sunlight Project is an investigative journalism effort that found over 240 officials from the United States government have moved to or from crypto related companies during the past few years.

The Crypto Sunlight Project says Cory Booker, the junior senator from New Jersey, is “a strong crypto sympathizer.”

The group noted that Bill Bradley, a former senator for New Jersey, is a board member for Paxos Trust Company, a New York-based financial institution, technology company, and cryptocurrency brokerage service.

In the New Jersey Legislature then-Senator Thomas Kean, Jr. sponsored the Virtual Currency and Blockchain Regulation Act, which would have established a weak regulatory framework for New Jersey that defined open blockchain tokens as intangible personal property, rather than securities, and exempted virtual currency from laws governing money transmitters.

These classifications would subject cryptocurrency to weaker regulatory controls than ordinary securities and investments. Now, Kean is heading to Congress.

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