Senate Committee Threatens to Subpoena Bankman-Fried to Compel Him to Testify on FTX Collapse

Senate Committee Threatens to Subpoena Bankman-Fried to Compel Him to Testify on FTX Collapse
Then CEO of FTX Sam Bankman-Fried testifies during a hearing before the House Financial Services Committee on Capitol Hill, in Washington, on Dec. 8, 2021. Alex Wong/Getty Images
Bryan Jung
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Two U.S. senators are threatening to subpoena Sam Bankman-Fried, the founder of FTX, to compel him to testify at a Senate committee hearing on the collapse of his crypto exchange next week.

Senators Sherrod Brown (D-Ohio) and Patrick Toomey (R-Pa.) demanded that Bankman-Fried testify at a Senate Committee on Banking, Housing, and Urban Affairs on Dec. 14, regarding the collapse of cryptocurrency exchange FTX, according to a letter sent on Wednesday.

Brown, the chair of the Senate committee, and Toomey have stated that they are prepared to issue a subpoena to Bankman-Fried if he refuses to appear voluntarily.

Bankman-Fried resigned from FTX in early November after it fell apart, when a run on deposits exposed an $8 billion hole in the exchange’s accounts, causing the company to collapse.

Brown’s office wrote Bankman-Fried that he “must answer” for the failures of FTX Trading Ltd. and of his hedge fund, Alameda Research, which are the two entities in the now-bankrupt FTX network.

“As the founder and CEO of FTX Trading Ltd. at the time of its collapse and the founder, principal owner, and former CEO of Alameda Research, you must answer for the failure of both entities that was caused, at least in part, by the clear misuse of client funds and wiped out billions of dollars owed to over a million creditors,” wrote Brown.

“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,” the senator continued.

Sam Bankman-Fried Asked to Testify in Front of Both the Senate and the House

Meanwhile, Rep. Maxine Waters (D-Calif.), chairwoman of the House Financial Services Committee, invited Bankman-Fried to appear in front of her committee for a hearing scheduled for Dec. 13.
“We appreciate that you’ve been candid in your discussions about what happened at FTX. Your willingness to talk to the public will help the company’s customers, investors, and others. To that end, we would welcome your participation in our hearing on the 13th,” Waters wrote in a tweet.

Bankman-Fried responded to Waters via Twitter on Dec. 4 that he “will testify” before the House Financial Services committee to discuss the circumstances of FTX’s collapse, but he said that it could be a while before he actually planned to appear before Congress and only after he first figured out had “what happened.”

“Rep. Waters, and the House Committee on Financial Services: Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain. I’m not sure that will happen by the 13th. But when it does, I will testify,” Bankman-Fried said in his tweet.
Waters told the disgraced FTX CEO in a following tweet that it was “imperative” that he attend the hearing on Dec. 13.
“Based on your role as CEO and your media interviews over the past few weeks, it’s clear to us that the information you have thus far is sufficient for testimony,” Waters tweeted.
“As you know, the collapse of FTX has harmed over one million people. Your testimony would not only be meaningful to Members of Congress but is also critical to the American people.”

Former FTX CEO Is Allegedly Hesitant to Appear on Capitol Hill

Jake Chervinsky, head of policy at the Blockchain Association, believes that Bankman-Fried is worried about testifying under oath in front of Congress.
“Translation: he doesn’t mind lying to Andrew Ross Sorkin or George Stephanopoulos, but lying to Congress under oath is less appealing,” Chervinsky said in a tweet.

Waters sent another tweet to the former FTX on Dec. 8, this time with tougher rhetoric.

“Lies are circulating at CNBC that I am not willing to subpoena Sam Bankman-Fried. He has been requested to testify at the December 13th hearing. A subpoena is definitely on the table. Stay tuned,” Waters said in a tweet..
The congresswoman was referring to a report from CNBC that said she told Democrats on her committee, a week before the hearing, that she had no plan to issue a subpoena to the former CEO.

CNBC reported that the Waters wanted the committee staff to convince Bankman-Fried to testify voluntarily, despite his hesitancy to comply.

Bankman-Fried was known to be a major donor on Capitol Hill, along with his cofounder and ex-girlfriend, Caroline Ellison.

At least nine lawmakers who are now investigating FTX for fraud each received more than $300,000 from the two founders of the failed firm, reported Breitbart.

FTX and Alameda Research Under a Probe by Federal Authorities

Meanwhile, federal prosecutors at the Office for the Southern District of New York and attorneys for the Securities and Exchange Commission (SEC) have sent requests for information to cryptocurrency investors and trading firms that have worked with FTX.
The prosecutors have begun examining the possibility that Bankman-Fried illegally steered the prices of two interlinked cryptocurrencies, TerraUSD and Luna, to benefit FTX and Alameda Research, reported The New York Times.

Federal prosecutors and the SEC are currently examining whether FTX broke the law by transferring its customer funds to Alameda.

TerraUSD and Luna both also collapsed in the wake of the FTX scandal.

The Department of Justice (DOJ) has stated that there should be an independent investigation into the failed crypto exchange, regarding fraud allegations revolving around its collapse, reported Breitbart.

Andrew R. Vara, a DOJ trustee, said that “An examiner could—and should—investigate the substantial and serious allegations of fraud, dishonesty, incompetence, misconduct, and mismanagement by the debtors.”

FTX was under investigation well before its collapse for violations of U.S. anti-money laundering laws that required cash transfer businesses to clearly identify their customers and to flag any potentially illegal activity to the authorities, reported Bloomberg.

Bankman-Fried Goes on Media Speaking Tour and Hires New Legal Representation

Bankman-Fried went on a weeks-long speaking media tour on podcasts and interviews, even while being asked to testify. He also appeared online at a summit hosted by The New York Times from his home in the Bahamas.

The former CEO is additionally facing multiple class-action lawsuits aimed either directly at him or his companies, or both.

Bankman-Fried hired New York defense attorney Mark Cohen to represent him on Dec 6, his representative Mark Botnick confirmed to Bloomberg.

A former federal prosecutor, Cohen was previously part of the legal team of Ghislaine Maxwell, the late Jeffrey Espstein’s convicted sex trafficking partner.

The former FTX CEO replaced his former law firm, Paul Weiss Rifkind Wharton & Garrison, after he ignored legal advice to not participate in the recent media interviews.

His former attorneys parted ways, citing a conflict of interest.

Bryan Jung
Bryan Jung
Author
Bryan S. Jung is a native and resident of New York City with a background in politics and the legal industry. He graduated from Binghamton University.
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