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United States Technology

Congressmembers Tried to Stop the SEC's Inquiry Into FTX (prospect.org) 147

Posted by msmash from the how-about-that dept.
The Securities and Exchange Commission was seeking information from collapsed cryptocurrency exchange FTX earlier this year, the Prospect reported Wednesday, bringing a new perspective to an effort by a bipartisan group of congressmembers to slow down that investigation. From the report: The March letter [PDF] from eight House members -- four Democrats and four Republicans -- questioned the SEC's authority to make informal inquiries to crypto and blockchain companies, and intimated that the requests violated federal law. Rep. Tom Emmer (R-MN), whom the Republican caucus just elected as majority whip, the number three position in the House GOP leadership, led the letter. In a contemporaneous Twitter thread, Emmer wrote: "My office has received numerous tips from crypto and blockchain firms that SEC Chair Gary Gensler's information reporting 'requests' to the crypto community are overburdensome, don't feel particularly ... voluntary ... and are stifling innovation."

We now know that FTX was one of those firms receiving information requests from the SEC, about the very activities that have brought down the firm. This raises the question of whether Emmer and the other congressmembers were acting on behalf of FTX (which has been credibly accused of snatching customer money to make risky bets) to try to chill an ongoing investigation from an independent regulatory and law enforcement agency. Some of the "Blockchain Eight," as the Prospect termed them in March, have benefited from crypto largesse. Five of the eight members received campaign donations from FTX employees, ranging from $2,900 to $11,600. Rep. Ted Budd (R-NC), one of the signatories, received half a million dollars in support from a Super PAC created by FTX co-CEO Ryan Salame.
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Congressmembers Tried to Stop the SEC's Inquiry Into FTX More

Congressmembers Tried to Stop the SEC's Inquiry Into FTX

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  • Don't worry (Score:3, Funny)

    by Anonymous Coward on Wednesday November 23, 2022 @01:26PM (#63074336)

    I'm sure a thorough investigation into Hunter Biden's laptop will resolve this. https://thehill.com/homenews/h... [thehill.com]

    • Re:Don't worry (Score:5, Insightful)

      by Opportunist ( 166417 ) on Wednesday November 23, 2022 @03:14PM (#63074728)

      You're really that dumb to think that this is a partisan problem?

      If anything is obvious now, then that BOTH sides of The Party are corrupt to the bone. It's no longer GOP vs. Dems, it's Congress vs. We, The People.

      • Re: (Score:3, Insightful)

        by Anonymous Coward

        If you can't see a difference between The know-nothing party and the democrats, you are badly misinformed.
        There have always been corruption problems in politics, it's a constant fight, but don't fucking dare ignoring the insanity coming from the skeleton of the Grand Old Party.

      • You're really that dumb to think that this is a partisan problem?

        If anything is obvious now, then that BOTH sides of The Party are corrupt to the bone. It's no longer GOP vs. Dems, it's Congress vs. We, The People.

        Nobody makes it thru the layers of politics to hold a high office without making multiple deals-with-the-devil. The difference is WHICH devil they prefer to make a deal with.

        In this particular example both the Rs and Ds took payouts from mr Bank-Fraudman.

        • Back in the 1970s, a (socialist) politician, who happened to be in power back then, pushed through the law that parties that gain more than, IIRC 2%, of the votes get their campaigning expenses comped by the state. Yes, your tax money paying for campaigns.

          Back then, this was a huge outcry. How dare they?

          I have to say, compared with the alternative, it's the lesser evil. I prefer to buy my politicians with tax money than having them being bought by corporations.

      • You're really that dumb to think that this is a partisan problem?

        If anything is obvious now, then that BOTH sides of The Party are corrupt to the bone. It's no longer GOP vs. Dems, it's Congress vs. We, The People.

        It's only corruption if it is against the law. In the US, it is totally legal to use economic incentives to motivate politicians and supreme court judges to agree with your point of view. You have money to spend? You can literally write the laws.

        I don't really understand why US is still considered a democracy. According to MSNBC a few months ago, only about 7% of the adult US population have any faith in the Congress.

        • Maybe we can launch a Kickstarter? If we get a few people together, maybe we can finall buy our own politician for the people?

      • Given that bribery and blatant insider trading are now perfectly legal for members Congress.

  • Didn't need to bribe the fake GOP? (Score:5, Insightful)

    by shanen ( 462549 ) on Wednesday November 23, 2022 @01:27PM (#63074344) Homepage Journal

    What I want to know is which Democrats were getting donations from FTX. But I better admit that my initial hypothesis is that there wasn't any need to bribe today's fake Republicans to get them to play his game.

    Government should NOT be about money. It should be about service to other people and to society, including the service of being an impartial and honest referee for the players at the games of money. Did you know about the research on RoI for investing in politics? Done well, it can't be beat. But it should be.

    • Re:Didn't need to bribe the fake GOP? (Score:5, Insightful)

      by VeryFluffyBunny ( 5037285 ) on Wednesday November 23, 2022 @01:34PM (#63074368)
      Meh! Dodgy companies bribing politicians to avoid scrutiny? Sounds like the system is working exactly as intended.

      • Re: (Score:3, Informative)

        by jonsmirl ( 114798 )

        This is chicken feed compared to the $40,000,000 given to other Democrats...
        Sam Bankman-Fried was No. 2 top donor to Democrats, only behind Soros [livemint.com]

        • He did $23 mil to the GOP (Score:5, Insightful)

          by rsilvergun ( 571051 ) on Wednesday November 23, 2022 @02:05PM (#63074486)
          so he was covering both sides. He did more to the Dems because when it comes to the GOP he can't compete with guys like Peter Theil. His $23 mil was barely even a blip. Dems get a lot less corporate cash, so he was hoping to be a big fish in a small pond.

          • Re:He did $23 mil to the GOP (Score:5, Informative)

            by Entrope ( 68843 ) on Wednesday November 23, 2022 @03:06PM (#63074702) Homepage

            Peter Thiel donated $33M this election cycle, versus SBF's $40M and George Soros's $128M, according to Open Secrets [opensecrets.org]. Also, SBF didn't donate $23M to Republicans. Who couldn't complete with whom?

            • Re:He did $23 mil to the GOP (Score:4, Interesting)

              by rsilvergun ( 571051 ) on Wednesday November 23, 2022 @03:33PM (#63074818)
              It's cute that you think Thiel only spent 33 million on the election. Go look up some of the think tanks he funds. Never mind, and here I go again spending karma, when he took down Gawker. Say what you will about Gawker they were a classic tabloid. That meant they did a lot of real good old-fashioned muck raking journalism and funded it with the kind of tawdry gossip everyone pretends to hate but loves to hear. Their biggest mistake in the Hogan trial was not realizing it wasn't a show trial.

              The point being Thiel spends an absurd amount of money and time on American politics and controlling your life. That's before we talk about the Kochs
            • Who the fuck moderated this shit-for-brains up?

              SBF donated $40m to Democrats on behalf of FTX.
              RS donated $23m to Republicans on behalf of FTX.
              That means FTX contributed at a 2:1 ratio favoring Democrats. Not a 1:0.
              FTX was, in fact covering both sides. Though the "Peter Thiel" thing is obviously wrong.
              As far as corporate contributions go, in general:

              George Soros $128m is eclipsed by the $230m in Republican donors between him and SBF.
              All Democratic donations over $10m add up to $310m across 10 donors

        • Re:Didn't need to bribe the fake GOP? (Score:4, Insightful)

          by MachineShedFred ( 621896 ) on Wednesday November 23, 2022 @02:32PM (#63074578) Journal

          If the GOP doesn't like crypto-bros giving money to the DNC, then maybe they should get on board with doing something about Citizens United.

          Nah, that would mean cutting off the Koch and Thiel spigot. They'd rather bitch about their opposition getting donations that are still far less than what they're taking in.

          Go have a look at the amount of money flowing out of GOP donors - it will make you blanch. Then let's talk about doing something to stop it, bilaterally.

          • Citizens United can only be overturned by a constitutional amendment. Yeah good luck with that.

            • And who starts the process for amending the Constitution?

              Oh, that would be Congress, wouldn't it. And the only reason it hasn't been marked up and passed already is because of Republican opposition because they like unlimited amounts of money coming from every single direction possible. Well, except for one particular direction of flow, apparently.

              My post still stands.

            • Or another Supreme Court decision. But also good luck with that too.

          • Re: (Score:2)

            by shanen ( 462549 )

            Reminded me why Lehman Brothers was allowed to take the fall that hurt the economy so badly the last time. At least that was the conclusion I reached after reading a couple of books about that crash. Several similar candidates were rescued in the run up, and then several other deserving candidates were rescued after the economy started crashing big time. The only significant difference I could detect was that Lehman had donated to the wrong (AKA Democratic) politicians.

            I was NOT able to detect any behaviora

            • As far as I can tell, the government picked Lehman at random and let them fail to make an example. A strong message needed to be delivered: we're a capitalism, and if a company takes on massive amounts of risk and their bets go bad, the government is NOT standing by with a blank check to bail you out. So the government picked ONE bad company and let it fall to pieces, and then rescued the rest.

              This would be like a lifeguard with the job of rescuing a dozen dumb kids who went to swim in a dangerous river

              • Re: (Score:2)

                by shanen ( 462549 )

                Nope. You should read more about the topic. Definitely not random and it most definitely did NOT do any job or fix any of the underlying problems. If anything, we are at more risk now.

                • I think youre wrong. Everything I read suggests that another 08-09 blowup is NOT in the cards any more. Banks and investment houses have WAY higher capital cushions nowadays, and much less exposure to subprime crap, specifically because of the 08-09 crisis. And they arent engaged in the insane libertarian-style lobbying to lower the standards like they used to. They know that the governmentJust. Might. Let.them.drown.

                  Finanacial types are pissed about Lehman, and fearful it could happen to them. And that

        • This is chicken feed compared to the $40,000,000 given to other Democrats...
          Sam Bankman-Fried was No. 2 top donor to Democrats, only behind Soros [livemint.com]

          Because republicans will ignore crypto regulation for free.
          The party of "FTX knows how to handle its money better than the government does."
          The one that there isn't a regulation they don't like, because it stifles innovation. That party.
          Etc.

          If YOU were a big unregulated shady crypto company, which politicians would YOU throw money at? Duuuuuuh...

          • Before responding to obvious partisan hacks, read up on the topic first... for your own sake.

            Republicans didn't turn a blind eye for free.
            FTX contributed at a 2:1 ratio to Dems/Repubs.
            The focus on the CEO is odd, since he wasn't the only person in the corporation empowered to make political donations.
            They were greasing both halves, just heaver on the Dem side.
      • Bipartisanship at its finest!

        • Re: (Score:2)

          by shanen ( 462549 )

          Were you going for a joke?

          But you reminded me of one metric of American political failure that needs to be updated: The mismatch between votes for Democratic representatives for the House of so-called Representatives and the actual "over-performance" of the so-called Republican candidates in terms of the actual seating in the House.

          Let's see if it's available with any of the obvious websearches...

          What? According to this plausible looking source it went the other way this year? https://www.aei.org/op-eds/a-h [aei.org]

      • How did this thread descend into a dick-measuring contest over who's giving more to whom in bribes?

    • Re:Didn't need to bribe the fake GOP? (Score:5, Insightful)

      by gweihir ( 88907 ) on Wednesday November 23, 2022 @01:37PM (#63074382)

      Government should NOT be about money. It should be about service to other people and to society, including the service of being an impartial and honest referee for the players at the games of money.

      Well, that would require politicians with honor, integrity and an actual understanding of how things work. People like this basically have no chance to make it into any office today.

    • Re:Didn't need to bribe the fake GOP? (Score:5, Informative)

      by trmj ( 579410 ) on Wednesday November 23, 2022 @01:44PM (#63074404) Journal

      From TFA:

      Reps. Tom Emmer (MN), Warren Davidson (OH), Byron Donalds (FL), and Ted Budd (NC) from the Republican side of the aisle;

      Reps. Josh Gottheimer (NJ), Jake Auchincloss (MA), Ritchie Torres (NY), and Darren Soto (FL) for the Democrats

      • Re: (Score:2)

        by shanen ( 462549 )

        Thanks, though I my intentions were broader. And with "suitable" adjustments for the respective histories of the two current parties in America. (The GOP was branded long ago as the party of "big business". That's sort of true even now, though it's become more like the party of "one business" in each line of business.)

    • Government should NOT be about money. It should be about service to other people and to society,

      Hooo, boy.

      Wait 'til you find out about lobbying...

      • Re: (Score:2)

        by shanen ( 462549 )

        I recommend the book Dark Money on the general topic, though lobbying was better covered in some other books.

    • "Government should NOT be about money."

      That's a wonderful fantasy, but it always has been and always will be.

      • Re: (Score:2)

        by shanen ( 462549 )

        Yes and no. It's case by case, where the cases are individual politicians. The problem is that the rules of the political game have been invaded by the money game to the point where it is quite hard for a politician with actual principles to succeed. These days it is actually getting worse for at least three reasons (1) The investors in politics are becoming more shrewd in their investments, (2) Better math using better computers, especially for "managing" elections and even for manipulating the polls aroun

    • RTFA:

      More consequentially, Emmer was the head of the National Republican Congressional Committee, the campaign arm for House Republicans, this year. The NRCC’s associated super PAC, the Congressional Leadership Fund, received $2.75 million from FTX in the 2022 cycle; $2 million from Salame in late September, and $750,000 from the company’s political action committee.

      That money helped House Republicans win the majority in 2022. Though FTX has been portrayed as a Democratic firm, thanks to t

      • Re: (Score:2)

        by shanen ( 462549 )

        Not clear of the timing of your reply, but I clarified my query in another comment somewhere in this thread.

  • Stupid, greedy, criminal? (Score:4, Insightful)

    by gweihir ( 88907 ) on Wednesday November 23, 2022 @01:34PM (#63074366)

    Probably all three. The US is more and more resembling a failed state.

    • Resembling?

      The only people "The State" is working for in the United States of America are the ones that pay the politicians directly. And the only way your pay to the politicians matter is if your contribution to them numbers somewhere north of the million dollar mark. Us peons tossing peanuts at them for campaigning don't even register as human to them. Sure, they need us to pull the correct lever at the voting booth, but beyond that we mean less than the dirt that catches on their shoes as they walk from

    • Probably all three. The US is more and more resembling a failed state.

      That sounds like a drunk uncle crying his family is a failure because Tommy knocked up a cheerleader and we might have to share the inheritance with, one of them.

      The US has issues, but Jesus Christ people, this kind of hyperbole really only tells us how fat and comfortable a person is, an inverse of their dire prognostications.

      • Re: (Score:2)

        by gweihir ( 88907 )

        Soo, an attempted coup, a deeply criminal (former) POTUS that the justice system cannot manage to get to, deep corruption everywhere is "issues"? I don't think so. The rot is sitting very deep now and getting deeper into the core of things.

  • eh (Score:2, Insightful)

    by nomadic ( 141991 )

    I think crypto generally is a scam and needs to be regulated, but there is a very good argument that the SEC has really overstepped its authority in trying to regulate the sector.

    • Re:eh (Score:5, Insightful)

      by Smidge204 ( 605297 ) on Wednesday November 23, 2022 @01:46PM (#63074408) Journal

      ...and that argument is..?

      Bear in mind that this is not "regulating crypto" so much as regulating an exchange just like any other exchange. It just so happens that FTX operated on cryptocoins as their securities. The actual instrument being exchanged is largely irrelevant.
      =Smidge=

      • Re: (Score:2)

        by nomadic ( 141991 )

        Well that's the question -- are cryptocoins securities? I mean, probably not. And if they're not securities, what gives the SEC the authority to regulate them? It doesn't matter how convoluted the instruments they create are, if they are based foundationally on things that aren't securities, I don't see why the SEC needs to be there.

        That isn't to say that FTX and its people shouldn't be investigated -- but the DOJ/FBI can handle that -- they're perfectly equipped to untangle things.

        • Well that's the question -- are cryptocoins securities? I mean, probably not.

          "a thing deposited or pledged as a guarantee of the fulfillment of an undertaking or the repayment of a loan, to be forfeited in case of default" [google.com]

          Basically, anything can be a security. Why are you so motivated to reduce the scope of SEC oversight?

          • That's not what they mean by "security" here. You needed to go to the next definition: "a certificate attesting credit, the ownership of stocks or bonds, or the right to ownership connected with tradable derivatives."

            • Re: (Score:2)

              by jbengt ( 874751 )

              "a certificate attesting credit, the ownership of stocks or bonds, or the right to ownership connected with tradable derivatives."

              Well, that definition matches crypto exchanges better than the other definition for securities.

            • That's not what they mean by "security" here. You needed to go to the next definition: "a certificate attesting credit, the ownership of stocks or bonds, or the right to ownership connected with tradable derivatives."

              ICOs largely seem to be a way to avoid the paperwork and regulations of IPOs or other stock based funding mechanisms. And the coin at the centre of FTX's ICO was a big part of the meltdown, so that seems pretty squarely a security for the SEC's purpose.

            • Re: (Score:2)

              by ceoyoyo ( 59147 )

              Right, because a "token" isn't a "certificate" and it doesnt "attest credit" it's just a fun game some people are playing on the Internet!

              Crypto is "currency," then it's "an investment" but when someone takes any of that serious it's "naw man, that's just jokes! We're just playing with worthless bits!"

          • Well that's the question -- are cryptocoins securities? I mean, probably not.

            "a thing deposited or pledged as a guarantee of the fulfillment of an undertaking or the repayment of a loan, to be forfeited in case of default" [google.com]

            Basically, anything can be a security. Why are you so motivated to reduce the scope of SEC oversight?

            So the SEC has authority over the E.V.E. economy? The World of Warcraft auction house? The government can do whatever you want bud, but is your opening argument in front of the Supreme Court going to be that Google result? A Twitter poll?

            I'm in favor of regulating crypto exchanges as much as any other financial institution, but we have to be real about it.

          • Re: (Score:2)

            by nomadic ( 141991 )

            "Basically, anything can be a security. Why are you so motivated to reduce the scope of SEC oversight?"

            Legally, that's not true; to be a security an instrument has to be linked to some underlying asset. Currencies (non-crypto) are not securities, for example.

            "Why are you so motivated to reduce the scope of SEC oversight?"

            Why do you think I am "so motivated"? Because I made an offhand remark on Slashdot? In any event it's generally a good idea to not let the government assume powers that it hasn't been legis

    • If it's a scam, shouldn't it be outlawed rather than regulated?

  • The only case where the SEC has been highly suspicious in crypto is SEC vs Ripple. The case has been going on for years, and the SEC has been trying to keep as much of it out of the public spotlight as possible. It also appears that Ripple got ahold of some pretty bad documentation from the SEC itself after the judge ordered the SEC to stop balking and turn over a treasure trove of documents to Ripple.

    Ripple is a very dangerous tech company for a lot of well-connected parties because their blockchain is ins

    • Hahahah. Yea sure. Until the one guy in Ripple cashes out and disappears overnight with the cash. ALL the crypto bros claim reliability, perfect decentralization, walking-on-water, 45% ROI, no downsides, and overall general godliness. How many have delivered? None.

      I literally know boo about Ripple, but if you believe their claims of world-altering blockchain technology, I have a bridge to sell you.

      Have the past 3 months taught us nothing?

      • Have the past 3 months taught us nothing?

        That the past [insert number of years here] have meant nothing, as far as warning people of the "safety" of crypto?

  • How long before these same folks ask why the SEC didn't do more to protect the marks, er, "investors", using FTX?

  • Anyone can buy a letter from the House of Representatives. I'm pretty sure I got one in my last box of Lucky charms. Wake me when they have senators who have actually pushed legislation through a committee.

    Now if that happens we are well and truly fucked. If crypto succeeds in getting itself declared a commodity when it is very, very clearly a security and it's only a matter of time before big Banks start creating crypto-backed securities just like they created mortgage backed securities back in 2008.

  • I agree that regulation is burdensome and a barrier to entry. I have no problems with smaller firms being having looser rules or maybe playing a little looser with the rules. Some will be crooks, most will be trying to run an actual business, getting by.

    At what level or size of a company should the SEC be able to perform regulatory activity for a company?

    Myself, I'd say $50 million USD of client "deposits" should be enough to allow external verification that a firm isn't a scam, to at least verify money i

    • Re: (Score:3)

      by PPH ( 736903 )

      At what level or size of a company should the SEC be able to perform regulatory activity for a company?

      It's not the size of the company. It's the sophistication and risk tolerance of the customers. Anyone selling financial products to other than SEC Rule 501 Regulation D customers should be subject to SEC scrutiny.

  • Okay, we won't regulate.

    Industry implodes through gross incompetence, negligence, criminal malfeasance.

    Maybe regulate?

  • Corrupt Congress Critters (Score:5, Interesting)

    by TomR teh Pirate ( 1554037 ) on Wednesday November 23, 2022 @03:19PM (#63074750)
    Congress-critters should be required to wear jumpsuits a la NASCAR drivers, complete with corporate badging from all the filthy money they take from those corporations working against the public interest.
  • Wow, I think we found the key to mending relations between Republicans and Democrats..... CORRUPTION! Just let our politicians do whatever the hell they want with no accountability, and we will all get along! Better than a civil war that everyone is talking about!

  • We need to know who is trying to aid and abet.

  • Captain: I am shocked, shocked there is gambling going on in this casino. Runner: Your winnings, sir.

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