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House to probe FTX collapse, ‘expects’ Sam Bankman-Fried to testify

Nov. 16, 2022 Updated Wed., Nov. 16, 2022 at 8:04 p.m.

FTX founder Sam Bankman-Fried speaks during a House hearing in 2021. Congress is now investigating the collapse of the cryptocurrency exchange.   (Jabin Botsford/Washington Post)
FTX founder Sam Bankman-Fried speaks during a House hearing in 2021. Congress is now investigating the collapse of the cryptocurrency exchange.  (Jabin Botsford/Washington Post)
By Tony Romm Washington Post

The House Financial Services Committee will hold a hearing next month about the collapse of cryptocurrency exchange FTX, as Congress ratchets up its scrutiny of the broader crypto industry, Rep. Maxine Waters (D-Calif.), the panel’s leader, announced on Wednesday.

The panel said it “expects” to hear directly from Sam Bankman-Fried, the founder of FTX now at the center of an international maelstrom, though Democrats and Republicans also signaled their inquiry would likely expand as they consider the need for a legislative response.

“The fall 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,” Waters said in a statement.

“Unfortunately, this event is just one out of many examples of cryptocurrency platforms that have collapsed just this past year.”

The top Republican on the panel, Rep. Patrick T. McHenry (N.C.), joined Waters in supporting the probe.

McHenry stands to inherit the committee if Republicans capture control of the House as expected.

“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,” McHenry said.

“It’s essential that we hold bad actors accountable so responsible players can harness technology to build a more inclusive financial system.”

Bankman-Fried did not immediately respond to a request for comment.

The heightened congressional scrutiny reflected the speed and magnitude of the collapse at FTX, the world’s third-largest cryptocurrency exchange by volume.

A series of risky bets by Bankman-Fried and his related hedge fund, Alameda Research, appear to have created a liquidity crisis, sparking the digital equivalent of a bank run – and sending the firm into bankruptcy.

The aftermath has eviscerated Bankman-Fried’s wealth, while rattling Silicon Valley, where investors began writing off million-dollar sums – and startups linked to FTX braced for financial impact of their own.

In the nation’s capital, meanwhile, the fallout has sparked some early soul-searching among lawmakers who eagerly took Bankman-Fried’s political donations and policy advice ahead of the 2022 midterm election.

Along with the House hearing, Senate Democrats and Republicans signaled this week they also hoped to probe FTX and question Bankman-Fried – though some in Congress expressed doubts that he would be able to testify as he faces multiple investigations.

“I think that a lot of them have to explain what they’ve done,” said Sen. Sherrod Brown (D-Ohio), the chairman of the Senate Banking Committee, as he called for a broader congressional inquiry.

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