The huge cryptocurrency exchange FTX, which failed last week and sought bankruptcy protection, will be the subject of an investigation by lawmakers. Investors and customers are now facing losses that might reach billions of dollars.
The 30-year-old founder and former CEO of FTX, Sam Bankman-Fried, who was once hailed as a hero in the cryptocurrency community but now faces potential civil and criminal charges related to FTX’s collapse, is expected to testify before the House Financial Services Committee, it was announced on Wednesday.
At a hearing in December, the panel also anticipates hearing from representatives of FTX, other cryptocurrency exchanges like Binance, Bankman-hedge Fried’s fund, Alameda Research, and others. Rep. Maxine Waters (D-CA), the committee’s chair, said in a statement via email that “the collapse of FTX has posed tremendous harm to over one million users, many of whom were everyday people who invested their hard-earned savings into the FTX cryptocurrency exchange, only to watch it all disappear within a matter of seconds.”
The announcement that FTX had sought bankruptcy protection on Friday stunned the cryptocurrency community, which has experienced a great deal of volatility this year, including a significant drop in the price of bitcoin and other digital assets. However, the extent of FTX’s fall serves as a stark reminder of the enormous market dangers associated with the burgeoning crypto sector. Wealth worth billions of dollars may have been lost in a matter of days. The Justice Department and Securities and Exchange Commission are both looking into the situation.
Rep. Patrick McHenry, the ranking member, stated, “For FTX’s consumers and the American people, we must find out what’s going on.” We must hold wrongdoers accountable in order for good actors to use technology to create a more open financial system. The Treasury Department and other organisations are to do research on the effects of cryptocurrencies on financial stability and national security, according to an executive order issued by President Joe Biden in March.
In multiple hearings on Capitol Hill this year, Treasury Secretary Janet Yellen stated that additional government regulation is required to control the spread of cryptocurrencies due to the risks they represent to financial markets. In April, Federal Reserve Chair Janet Yellen stated that “our regulatory frameworks should be intended to foster responsible innovation while addressing risks, especially those that could disrupt the financial system and economy.”