The Republican arm of the US Congress recently opened investigations into the role of the Securities and Exchange Commission (SEC) following FTX’s fall.
Congress Representative Patrick McHenry [R] had written to the SEC Chairman, Gary Gensler, requesting the submission of records and communications between the commission and the defunct FTX in the periods up to its bankruptcy and beyond. The letter, co-signed by Michigan’s Bill Huizenga, who sits at the helm of financial oversight and investigations in the lower house, sought to quiz SEC on the timing of its charges and probe further for any possible collusion between Bankman-Fried and chair Gensler.
“One cannot have it both ways, asserting authority while avoiding responsibility”, Congresswoman Ritchie Torres (D) had said in reaction to Gensler’s actions in the weeks following FTX collapse. Ritchie had called n her colleagues to look into FTX in January after it launched a probe into celebrities who promoted the defunct Ethereum Max while ignoring the warning signs from SBF’s handling of affairs.
The investigation is only one in a series of questioning initiated by Congress. Last year, it reacted negatively to reports of the SEC demanding companies to reveal their climate transition plans in their report. The SEC was accused of being climate neutral, which it reacted by claiming otherwise — “whether its crypto or climate risk.”
Also in December, the SEC, who had charged FTX for scheming to defraud investors, began further investigations into FTX’s list of investors to see if they did their due diligence. The double-edged sword will see those investors either punished by the SEC for the absence of proper due diligence or by their stakeholders in a case without due diligence.
As Congress doubles down on the SEC, it has continued to double down on crypto companies with stringent regulatory hawkishness equally. Last week, Kraken received a hefty penalty of $30 million for failing to register its staking service in the US. The clampdown leaves a load of worry for other US-based exchanges offering similar services as it continues to send signals of America as an anti-crypto environment.
Congress has set the 23rd of February for the submission of all records through the agency’s communications director, Gurbir Grewal, with a tentative hearing date to follow. This will be SEC Gensler’s first appearance at an oversight hearing since 2021.