By Pam Martens and Russ Martens: December 8, 2022 ~
The past 48 hours has brought major developments in the battle lines being drawn in the crypto wars.
Let’s start with the unusual letter that Senator Sherrod Brown (D-OH) sent yesterday to Sam Bankman-Fried, the ousted CEO of the collapsed and scandalized crypto exchange, FTX, via his new lawyer, Mark S. Cohen.
Typically, if you want a witness to testify at a Senate Banking Committee hearing, one doesn’t tell his attorney in writing that you know the witness is guilty of law-breaking activities. (But then, again, most people credibly alleged to have done what Sam Bankman-Fried has done would by now be warming a cot in a cold prison cell.)
Brown advises in the letter that “There are still significant unanswered questions about how client funds were misappropriated, how clients were blocked from withdrawing their own money, and how you orchestrated a cover up.”
Senator Sherrod Brown goes on in the letter to order Bankman-Fried to appear before the Senate Banking Committee next Wednesday, December 14, at 10 a.m. Brown wants a confirmation of that appearance by 5:00 p.m. today. If Brown doesn’t get that confirmation, he advises that he is “prepared, along with Ranking Member Pat Toomey, to issue a subpoena to compel your testimony.”
The Senate Banking hearing is titled “Crypto Crash: Why the FTX Bubble Burst and the Harm to Consumers.” It presently has just two witnesses officially scheduled: actor Ben McKenzie, a long-term critic of crypto and the celebrities who push it on a gullible public; and Law Professor Hilary Allen of the American University Washington College of Law. McKenzie is co-writing a book with journalist Jacob Silverman, Easy Money: Cryptocurrency, Casino Capitalism, and the Golden Age of Fraud, set for release in July of next year. Professor Allen is the author of The Superficial Allure of Crypto published in the September edition of the IMF’s Finance and Development.
Bankman-Fried has also been invited to testify the previous day (December 13) before the House Financial Services Committee, which is chaired by Congresswoman Maxine Waters. There has been a bit of waffling as to whether Waters will issue a subpoena if Bankman-Fried fails to show.
More crypto fireworks went off in another unusual letter sent on Tuesday to the Government Accountability Office (GAO) by Congressman Ritchie Torres, a Democrat from New York. Torres (from the same political party as SEC Chair Gary Gensler) asks the GAO to investigate the SEC’s failure to “uncover the largest crypto Ponzi scheme in US history” and blames Gensler for “being singularly responsible for the regulatory failures surrounding the collapse of FTX and its affiliate FTX US.”
Torres, it should be noted, is a big crypto fan. Bankman-Fried’s well-funded Political Action Committee (PAC), Protect Our Future, endorsed Torres in his 2022 campaign for Congress.
In May, CNBC’s Brian Schwartz reported that Torres had written an OpEd in the New York Daily News in March, calling on New Yorkers to get behind the cryptocurrency market, but failed to mention that Torres was getting fundraising support from crypto backers.
Schwartz reported that “Crypto investors Ben Horowitz, Anthony Albanese and Chris Dixon — leaders at venture capital firm Andreessen Horowitz — hosted the ‘Ritchie Torres Ethereum Fundraiser’ at the swanky private nightclub Zero Bond in New York City on April 13” and “Fred Wilson, a partner at venture capital firm Union Square Ventures, which is also heavily invested in cryptocurrencies, co-hosted another fundraising event for Torres in April, the lawmaker’s aide confirmed.”
In the Daily News OpEd, Torres used the same old trope that was used to avoid regulating derivatives and which led to the largest financial collapse in 2008 since the Great Depression. Torres wrote:
“The state’s regulatory regime [toward crypto] has the cost of inhibiting job creation and innovation without the actual benefit of protecting a single consumer or investor. It’s a classic case of bureaucracy trumping efficacy.
“With a multi-billion dollar market capitalization, crypto is here to stay. It’s not going anywhere. New York City should and must embrace crypto if it is to remain the financial capital of the world. We no longer live in a world where our central place in finance can be taken for granted.”
There are plenty of respected and highly knowledgeable individuals who believe crypto could topple the U.S. as the financial capital of the world. Investment icon Warren Buffet has called the largest cryptocurrency, Bitcoin, ‘rat poison squared’; global economist, Nouriel Roubini, told the Senate Banking Committee in 2018 that ‘Crypto is the Mother of All Scams and (Now Busted) Bubbles While Blockchain Is The Most Over-Hyped Technology Ever, No Better than a Spreadsheet/Database.’ More recently, Bill Gates, co-founder of Microsoft, one of the most valuable tech companies in the world, stated that cryptocurrencies are ‘100% based on greater fool theory.’ And just this past June 1, more than 1,600 scientists and software engineers wrote to Committee chairs in Congress to warn that both crypto and blockchain are shams.”
Should you believe those august voices or a guy taking money from the crypto industry?