Sam Bankman-Fried hired ex-DC regulators to boost crypto company whilst seeking clearinghouse approval
STANFORD, CALIFORNIA: Disgraced CEO of failed crypto exchange FTX Sam Bankman-Fried was working with scores of former DC financial regulators that would ultimately help regulate his doomed crypto company. Before the 30-year-old's arrest for multiple counts of fraud, emails reveal Bankman-Fried was also seeking to gain clearinghouse approval for his company.
Bankman-Fried hired top deputies including former regulator Ryne Miller, who helped him arrange several meetings to regulate his crypto firm. Miller served as legal counsel to Gary Gensler and at that time Gensler was Commodity Futures Trading Commission (CFTC) chairman and now chairs the Securities and Exchange Commission (SEC). Emails also show Miller helped arrange Bankman-Fried to meet and share a meal with former CFTC Commissioner Dan Berkovitz, who is currently general counsel for the SEC, according to Los Angeles Times. However, after media inquiry into Berkovitz's role with FTX, he abruptly announced his resignation effective January 31, 2023.
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FTX employees like Mark Wetjen, the company's former head of policy and regulatory strategy and current director at FTX-affiliated company LedgerX reached out to CFTC Chairman Rostin Behnam in August 2021 and the meeting would be subsequently scheduled, revealed the emails. Dennis Kelleher, the president of financial regulation nonprofit Better Markets said, CFTC had an open-door policy for FTX. "These few emails show that the CFTC had an open-door policy to meet basically whenever FTX wanted to meet, including [with] the then-acting chair," according to Daily Mail.
"FTX hired former CFTC officials for the purpose, obviously, to access and influence the CFTC, where FTX had a pending radical proposal to dramatically change the structure and operations of clearinghouses," he said. Following the shocking downfall of FTX, Behnam told the Senate Agriculture Committee that he had met with Bankman-Fried to discuss the consideration of FTX's clearinghouse application during their multiple meetings. Clearinghouses are financial institutions that help establish a low-risk exchange of payments, securities or derivatives transactions to honor a successful trade settlement obligations to another firm.
Bankman-Fried was scheduled to testify that he had been pressured into signing Chapter 11 bankruptcy papers for his company on December 13, but was arrested in the Bahamas on the 12th of the month. In prepared written testimony, Bankman-Fried mentioned, "Most of that pressure came from Ryne Miller," reported the source. Adding that the attorneys overseeing the bankruptcy, from the firm Sullivan & Cromwell, also pressured him to sign. "They also called many of my friends, coworkers and family members...some of whom were emotionally damaged by the pressure. Some of them came to me, crying," he wrote.
