The U.S. House Committee Decided to Conduct A Hearing on the Collapse of FTX

Top regulators across the world and the United States have been watching the recent turn of events that led to the collapse of crypto exchange FTX with its valuation tanking from $32 billion to zero in week’s time.

 

After Mt. Gox, this has been one fo the biggest high-profile collapse of a crypto trading platform over the last decade. The U.S. House Financial Services Committee has decided that it will be conducting a hearing next month in December over the collapse of FTX and its wide spreading implications over the entire industry.

 

The Committee is expecting to hear from “the companies and individuals involved, including Sam Bankman-Fried, Alameda Research, Binance, FTX, and related entities, among others”.

 

Speaking on the development, Rep. Patrick McHenry, R-N.C. said: Oversight is one of Congress’ most critical functions and we must get to the bottom of this for FTX’s customers and the American people. It’s essential that we hold bad actors accountable so responsible players can harness technology to build a more inclusive financial system.”

 

Rep McHenry shall be taking the position of chair of the House Committee next year in 2023. In addition to this, the U.S, Treasury Secretary Janet Yellen has shared her opinion over the collapse of the FTX crypto exchange saying that this episode demonstrates the need for more effective oversight of cryptocurrency markets.”

 

Additionally, Yellen also talked about the reports generated by the Treasury Department in response to the executive order on digital assets issued by the Biden administration earlier this year in September. Yellen said that they had already identified the risk factor at play in the FTX collapse. Had the report turned into a policy, it could have avoided this collapse, she added.

 

Some of the risks we identified in these reports, including comingling of customer assets, lack of transparency, and conflicts of interest, were at the center of the crypto market stresses observed over the past week,” said Yellen.  

 

The federal government, including Congress […] needs to move quickly to fill the regulatory gaps the Biden Administration has identified,” she added further. Yellen added that the existing regulations to financial products and services “must be enforced rigorously so that the same protections and principles apply to crypto assets and services.”

 

In another Twitter thread on Wednesday, November 16, FTX chief Sam Bankman-Fried admitted that his crypto exchange became “overconfident” and “careless”. He also added that at FTX, problems were brewing” that were larger than [he] realized”.

SBF wrote: “Roughly 25% of customer assets were withdrawn each day—$4b. As it turned out, I was wrong: leverage wasn't ~$5b, it was ~$13b. $13b leverage, total run on the bank, total collapse in asset value, all at once. Which is why you don't want that leverage”.