Senate crypto hearing yields big claims, possible regulation

Dec 14, 2022, 12:38 PM | Updated: 12:51 pm
Actor Ben McKenzie testifies during a Senate Banking Committee hearing on cryptocurrency and the co...

Actor Ben McKenzie testifies during a Senate Banking Committee hearing on cryptocurrency and the collapse of the FTX crypto exchange and its founder Sam Bankman-Fried, at the Capitol in Washington, Wednesday, Dec. 14, 2022. He is joined at left by investor Kevin O'Leary, and Cato Institute Center for Monetary and Financial Alternatives Director of Financial Regulation Studies Jennifer Schulp. (AP Photo/J. Scott Applewhite)

(AP Photo/J. Scott Applewhite)

Whether increased regulation would have prevented the spectacular collapse of cryptocurrency exchange FTX was fiercely debated at a hearing of the Senate’s banking committee Wednesday. However, new legislation is potentially on the way.

Sen. Elizabeth Warren announced at the hearing bipartisan legislation aimed at cracking down on cryptocurrencies being used in money laundering. The legislation, co-sponsored by Republican Sen. Roger Marshall of Kansas, would require cryptocurrency exchanges to verify customer identities like banks and other financial institutions do.

“Crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers and for rogue states that want to launder money,” said Warren, the Massachusetts Democrat, adding that “crypto doesn’t get a pass to help the world’s worst criminals – no matter how many television ads they run or how many political contributions they make.”

Republican Sen. Cynthia Lummis, of Wyoming, said she and Democratic Sen. Kirsten Gillibrand, of New York, would reintroduce their bipartisan legislation, the Responsible Financial Innovation Act, next year. That act would require disclosures and consumer protection obligations from cryptocurrency issuers.

Lummis, like several other Republicans on the banking committee, said the alleged financial crimes of former FTX CEO Sam Bankman-Fried should not be used to target cryptocurrency more generally.

“Let’s separate digital assets from corrupt organizations,” she said. “FTX is good old-fashioned fraud.”

However, Democratic Sen. Sherrod Brown, chairman of the Senate Committee on Banking, Housing and Urban Affairs, asked the hearing’s four witnesses – two crypto proponents and two critics – whether fraud was systemic at other firms in the industry. They all indicated that it was – one of the few points of agreement in the entire hearing.

Hilary J. Allen, professor of law at the American University Washington College of Law, testified that the current environment cryptocurrency operates in is highly conducive to fraud.

“Sam Bankman-Fried may have engaged in good old-fashioned embezzlement,” she said, “but the embezzlement was able to reach such a scale and go undetected for so long because it was crypto – shrouded in opacity, complexity, and mystique.”

Entrepreneur Kevin O’Leary, best known as Mr. Wonderful on the TV show “Shark Tank,” disagreed with the characterization, even though the $15 million he earned as a paid spokesman for FTX is now essentially worthless.

“I am of the opinion that crypto, blockchain technology and digital payment systems will be the 12th sector of the S&P within a decade,” he said, referring to the S&P 500, a well-known benchmark for stocks.

O’Leary also testified that Bankman-Fried told him that the collapse of FTX was due to its battle with crypto competitor Binance, which also held a stake in FTX.

“These two behemoths that owned the unregulated market together… were at war with each other,” O’Leary said. “And one put the other out of business.”

Federal prosecutors say Bankman-Fried defrauded FTX customers and investors starting in 2019 and illegally diverted their money to cover expenses, debts and risky trades at the crypto hedge fund he started in 2017, Alameda Research. Bankman-Fried, 30, was arrested Monday in the Bahamas at the request of the U.S. government, and remains in custody after being denied bail.

Pennsylvania Republican Sen. Pat Toomey, the ranking member of the banking committee, said FTX’s actions do not reflect the business of cryptocurrency as a whole.

“There’s nothing intrinsically good or evil about software – it’s about what people do with it,” he said. “Code committed no crime.”

However, actor and author Ben McKenzie Schenkkan, best known for his role as Jim Gordon on “Gotham,” said his research shows cryptocurrency is built on “misinformation, hype and fraud” and that the estimated 40 million Americans who have invested in it were lied to.

“In my opinion, the cryptocurrency industry represents the largest Ponzi scheme in history,” he said. “The fact that it has roped in tens of millions of Americans from all walks of life, as well as hundreds of millions of people worldwide, should be of concern to us all.”

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


              Investor and star of "Shark Tank" Kevin O'Leary, testifies before the Senate Banking Committee about cryptocurrency and the collapse of FTX, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              Actor Ben McKenzie testifies during a Senate Banking Committee hearing on cryptocurrency and the collapse of the FTX crypto exchange and its founder Sam Bankman-Fried, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              Actor Ben McKenzie testifies during a Senate Banking Committee hearing on cryptocurrency and the collapse of the FTX crypto exchange and its founder Sam Bankman-Fried, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              Actor Ben McKenzie testifies during a Senate Banking Committee hearing on cryptocurrency and the collapse of the FTX crypto exchange and its founder Sam Bankman-Fried, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              Cato Institute Center for Monetary and Financial Alternatives Director of Financial Regulation Studies Jennifer Schulp testifies before the Senate Banking Committee during a hearing about cryptocurrency and the collapse of the FTX crypto exchange and its founder Sam Bankman-Fried, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              Investor and star of "Shark Tank" Kevin O'Leary, testifies before the Senate Banking Committee about cryptocurrency and the collapse of FTX, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              Investor and star of "Shark Tank" Kevin O'Leary, testifies before the Senate Banking Committee about cryptocurrency and the collapse of FTX, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              American University Washington College of Law Professor Hilary Allen testifies before the Senate Banking Committee during a hearing about cryptocurrency and the collapse of the FTX crypto exchange and its founder Sam Bankman-Fried, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              Sen. Sherrod Brown, D-Ohio, chairman of the Senate Banking Committee, and Sen. Pat Toomey, R-Pa., right, the ranking member, lead a hearing on cryptocurrency and the collapse of the FTX crypto exhange and its founder Sam Bankman-Fried, at the Capitol in Washington, Wednesday, Dec. 14, 2022. (AP Photo/J. Scott Applewhite)
            
              Actor Ben McKenzie testifies during a Senate Banking Committee hearing on cryptocurrency and the collapse of the FTX crypto exchange and its founder Sam Bankman-Fried, at the Capitol in Washington, Wednesday, Dec. 14, 2022. He is joined at left by investor Kevin O'Leary, and Cato Institute Center for Monetary and Financial Alternatives Director of Financial Regulation Studies Jennifer Schulp. (AP Photo/J. Scott Applewhite)

AP

FILE - Health and Human Services Secretary Xavier Becerra speaks during a news conference at the HH...
Associated Press

Feds expect to collect $4.7B in insurance fraud penalties

WASHINGTON (AP) — The Biden administration estimated Monday that it could collect as much as $4.7 billion from insurance companies with newer and tougher penalties for submitting improper charges on the taxpayers’ tab for Medicare Advantage care. Federal watchdogs have been sounding the alarm for years about questionable charges on the government’s private version of […]
17 hours ago
(AP Photo/Susan Walsh)...
Associated Press

President Biden to end COVID-19 emergencies on May 11

WASHINGTON (AP) — President Joe Biden informed Congress on Monday that he will end the twin national emergencies for addressing COVID-19 on May 11, as most of the world has returned closer to normalcy nearly three years after they were first declared. The move to end the national emergency and public health emergency declarations would […]
17 hours ago
Associated Press

‘Father of Peeps’ marshmallow candies Bob Born dies at 98

Ira “Bob” Born, a candy company executive known as the “Father of Peeps” for mechanizing the process to make marshmallow chicks, has died. He was 98. Just Born Quality Confections, the 100-year-old family-owned company Born led for much of his life, said Monday that he had died peacefully on Sunday. Born began his life in […]
17 hours ago
Associated Press

Russian millionaire on trial in hack, insider trade scheme

BOSTON (AP) — A wealthy Russian businessman and associates made tens of millions of dollars by cheating the stock market in an elaborate scheme that involved hacking into U.S. computer networks to steal insider information about companies such as Microsoft and Tesla, a prosecutor told jurors on Monday. Vladislav Klyushin, the owner a Moscow-based information […]
17 hours ago
FILE - The reflection of a 2021 Ford Mustang Mach E is seen in the window as it charges at a Ford d...
Associated Press

Court upholds Minnesota ‘Clean Car Rule’ tied to California

ST. PAUL, Minn. (AP) — The Minnesota Court of Appeals on Monday upheld the state’s “Clean Car Rule,” which ties the state’s vehicle emission standards to California regulations, as judges accepted assurances that California’s planned phaseout of gasoline-powered cars won’t automatically apply in Minnesota. A three-judge panel rejected the arguments of Minnesota’s auto dealers, who […]
17 hours ago
Associated Press

SoFi Technologies, CACI International rise; Ford, Hess fall

NEW YORK (AP) — Stocks that traded heavily or had substantial price changes Monday: SoFi Technologies Inc., up 74 cents to $6.68. The financial services company reported strong fourth-quarter financial results. Alliance Resource Partners L.P., up $1.83 to $22.54. The Tulsa, Oklahoma-based coal miner’s fourth-quarter profit and revenue beat analysts’ forecasts. Colgate-Palmolive Co., up $1.29 […]
17 hours ago

Sponsored Articles

...
Day & Night Air Conditioning, Heating and Plumbing

Company looking for oldest air conditioner and wants to reward homeowner with new one

Does your air conditioner make weird noises or a burning smell when it starts? If so, you may be due for an AC unit replacement.
(Photo via MLB's Arizona Fall League / Twitter)...
Arizona Fall League

Top prospects to watch at this year’s Arizona Fall League

One of the most exciting elements of the MLB offseason is the Arizona Fall League, which began its 30th season Monday.
...
Children’s Cancer Network

Children’s Cancer Network celebrates cancer-fighting superheroes, raises funds during September’s Childhood Cancer Awareness Month

Jace Hyduchak was like most other kids in his kindergarten class: He loved to play basketball, dress up like his favorite superheroes and jump as high as his pint-sized body would take him on his backyard trampoline.
Senate crypto hearing yields big claims, possible regulation