While two of the biggest U.S. financial regulators along with the Department of Justice have collectively decided to hammer the founder of the failed crypto exchange FTX with claims of massive fraud, there was a time — less than a year ago — where that same founder was the talk of the town in Washington. Once-crypto billionaire Sam Bankman-Fried had schmoozed with lawmakers and regulators alike, and new emails show how the 30-year-old ex-FTX CEO used former regulatory officials as a means to sidle-up close to U.S. agencies.
The Los Angeles Times reported Monday that emails showed that Ryne Miller, FTX’s general counsel, managed to use old contacts with former regulators to get Bankman-Fried a seat at the dinner table with then-Commodity Futures Trading Commission commissioner Dan Berkovitz. The October 2021 meal took place at a high-end restaurant in Washington D.C. This is according to emails, which the LA Times received via a Freedom of Information Act request.
You see, Miller had worked as legal counsel for Gary Gensler, who was CFTC chairman and is now the chairman of the Securities and Exchange Commission, from 2012 to 2013. Miller then worked as an attorney for New York City-based law firm Sullivan & Cromwell before coming onto FTX in 2021. Miller reportedly paid Berkovitz $US50 ($69) for his share of the dinner.
Also at the dinner was Mark Wetjen, a former CFTC chairman and commissioner who, at the time, worked as head of policy for FTX. Zach Dexter, the CEO of LedgerX was also promised a seat at the table. LedgerX is an FTX-affiliate that’s been cited as one of the few solvent pieces of Bankman-Fried’s former crypto empire. Though after FTX and many of its affiliate companies declared bankruptcy, LedgerX has since been put up for sale.
The emails also show Miller tried to get then-CFTC commissioner Dawn Stump to come to the dinner, but reports could not confirm if she actually attended. You won’t find her at the CFTC anymore, since she’s now working as an advisor for crypto risk monitoring company Solidus Labs.
Gizmodo has gone into the revolving door between U.S. financial regulators and crypto companies, a door that had been spinning so fast it was enough to make your head spin. You have former officials from the U.S. treasury department, CFTC, SEC, and more coming into the likes of Binance, Coinbase, Astra Protocol, and other crypto-minded financiers like venture capital firm a16z.
Despite this alleged chummy-ness between crypto players and the people meant to regulate the industry, both the SEC and CFTC have filed civil complaints against Sam Bankman-Fried. Both agencies have alleged the FTX founder committed fraud by allowing an “unlimited line of credit” between the crypto exchange and his sister hedge fund company Alameda Research. Though the crypto founder, who often goes by his initials SBF, has claimed Alameda operated as a separate entity, regulators alleged he was still nominally in control of both FTX and Alameda, and had been funelling users’ crypto to the hedge fund.
Gizmodo reached out to the CFTC for comment but we did not immediately hear back. Berkovitz, the guy who helped organise the dinner with SBF and crypto regulators, is now general counsel for the SEC. We also reached out to the SEC to see if they had any comment on Berkovitz’ role with current SEC complaints against Bankman-Fried, but we did not immediately hear back.
During a recent hearing with the U.S. Senate Agriculture Committee, current CFTC Chairman Rostin Behnam tried to argue why his agency was the most-capable of regulating the entire flagging crypto industry, all while fighting allegations that his agency was palling around with SBF’s FTX. He said his agency met 10 times with FTX officers, though he further claimed all those meetings were over creating a crypto clearing house. He further lauded LedgerX as so sound because it was regulated by the CFTC.
Some U.S. government officials have been too eager to share a bed with the nascent crypto industry, to the point now that when that same industry is finally showing its ugliest side, those regulators who were supposed to protect users and investors from the worst whims of crypto bros are now forced to pretend they were always tough on crypto while flexing their rather thin muscles. Though that does little for the investors who have collectively lost billions of dollars just this year from flagrant crypto exchanges.