U.S. Senators Warren and Whitehouse Urge DOJ to Investigate FTX Collapse

U.S. Senators Warren and Whitehouse Urge DOJ to Investigate FTX Collapse

United States Senators Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I.) sent a joint letter to the Department of Justice (DOJ) requesting personal accountability for former FTX CEO Sam Bankman-Fried and any complicit FTX executives for wrongdoing following the cryptocurrency exchange’s swift collapse. 

But an investigation by the DOJ requested by Warren and Whitehouse may not be so easy. FTX is a Bahamian-based exchange and many aspects of its actions may be outside U.S. regulators.

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. 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.”

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“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 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,” concluded the lawmakers.

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.”