Bitfinex, Gemini, Binance, Coinbase, Kraken, and KuCoin were the main targets of one senator’s probe into protections the companies had in place in case a failure similar to FTX’s happened again.
The chair of the US Senate Finance Committee, Ron Wyden, has requested information from the six top crypto companies on consumer protection after FTX’s liquidity issues and eventual bankruptcy.
In different letters dated November 28, Wyden targeted the crypto exchanges requesting extensive information on what protections the exchanges have put in place in case a failure like the one that happened at FTX occurred.
The senator said that cryptocurrency users who had funds in FTX had no such protections as the ones at banks or registered brokers under the Securities Investor Protection Corporation or Federal Deposit Insurance Corporation (FDIC).
“As Congress considers much-needed regulations for the crypto industry, I will focus on the clear need for consumer protections along the lines of the assurances that have long existed for customers of banks, credit unions, and securities brokers. If these protections had been in place before the failure of FTX, far fewer retail investors would be facing precipitous financial harm today.”
Consumers who entrusted their assets to firms like @FTX_Official are discovering they have no protections when companies go bust. As Congress considers much-needed regulations for the crypto industry, I am laser-focused on ensuring real protections for consumers. https://t.co/QRdSUKe0A3
— Ron Wyden (@RonWyden) November 29, 2022
Furthermore, Wyden requested the six companies to offer conclusive answers including those on their subsidiary firms, use of customer data, safeguards of consumer assets, and guards against market manipulation by December 12.
The Senate Agriculture Committee has already scheduled a hearing to explore the collapse of FTX on December 1, and Senators Sheldon Whitehouse and Elizabeth Warren have called on the Justice Department to possibly prosecute people involved in any wrongdoing at the crypto exchange.
In the other chamber, the House Financial Services Committee will do a similar investigative hearing into FTX on December 13. Both chair Maxine Waters and committee ranking member Patrick McHenry have supported the congressional action, with McHenry calling the events around the failed exchange a “dumpster fire.”
FTX’s bankruptcy hearings, currently underway in the District of Delaware, showed that the exchange could be accountable to over 1 million creditors. The next hearing in the bankruptcy case has been scheduled for December 16.