Sam Bankman-Fried scored meeting with top regulator, tried to win influence before collapse: Emails

EXCLUSIVE — Disgraced ex-cryptocurrency kingpin Sam Bankman Fried and his since-bankrupt firm FTX scored a gathering with a high regulator and sought to sway them to undertake industry-friendly guidelines months earlier than the trade’s historic collapse, emails present.

In Could 2022, FTX pitched the Federal Deposit Insurance coverage Company on why it was apparently poised to be a “superior” cryptocurrency trade and was swiftly granted a gathering with its chairman, Martin Gruenberg, in line with emails obtained by the watchdog Defend the Public’s Belief and shared with the Washington Examiner.

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“Plainly Sam Bankman-Fried and his colleagues at his failed agency FTX had been trying to affect crypto rules to their benefit,” Michael Chamberlain, director of the watchdog group, advised the Washington Examiner. “Maybe we should always think about ourselves lucky as a result of, had been it not for FTX’s precipitous collapse, the executives now dealing with federal indictments could have been the first drivers of presidency oversight of themselves and their opponents.”

FTX was on a lobbying spree to achieve affect in Washington earlier than its November 2022 collapse, which was as a result of it allegedly diverting buyer funds to Alameda Analysis, a defunct-company Bankman-Fried co-founded. Bankman-Fried plead not responsible in January to a slew of felony prices, together with wire fraud and cash laundering.

On Could 28, 2022, FTX’s-then coverage head Mark Wetjen, a former commissioner of the Commodity Futures Buying and selling Fee, despatched a prolonged e mail to Gruenberg that touted the trade’s success and requested a gathering. The CFTC regulates derivatives and is tasked with defending the general public from fraud.

“We hope this message finds you effectively,” Wetjen emailed Gruenberg. “I wished to observe up on my observe from Thursday (sorry for the last-minute request!) and see when you may need time the week of June 13 to fulfill with me and Sam Bankman-Fried, the founder and CEO of FTX, one of many largest crypto exchanges globally.”

Within the e mail, Wetjen mentioned FTX’s “threat mannequin,” which pertained to its software pending earlier than the CFTC to amend rules that will pave the best way for extra federally approved cryptocurrency product choices. The appliance pertained to bitcoin and ethereum, the 2 most generally traded cash that preserve the best market caps.

“Sam and I’ve labored in conventional market buildings, and I strongly imagine the FTX mannequin is all issues thought of a superior mannequin,” Wetjen continued in his e mail. “We’re within the uncommon place of begging the federal authorities to manage us. … We might be thrilled to elucidate these factors additional in particular person in case you are amenable to a gathering. And to the extent the crypto {industry} comes up in discussions by way of FSOC [Financial Stability Oversight Council] or in any other case, we wished you to have this context and our views at FTX about the place the federal authorities ought to preserve its focus because it considers the dangers posed by the crypto {industry}.”

Later that night, Gruenberg replied and accepted Wetjen’s request.

“Good to listen to from you,” Gruenberg wrote. “Hope all is effectively with you too. Sorry to take so lengthy to answer your earlier e mail. I would be glad to fulfill with you and Mr. Bankman-Fried. If it is OK, I will ask my assistant, Diane Armstrong, to observe up with you to discover a handy day and time through the week of June 13. Get pleasure from the remainder of the weekend.”

Wetjen wrote again roughly one hour later, “Thanks very a lot Marty.”

Julianne Breitbeil, a spokeswoman for the FDIC, confirmed to the Washington Examiner {that a} “single assembly” befell.

“Chairmen of the FDIC have routine courtesy visits with leaders of economic corporations and establishments,” she stated.

Nonetheless, the watchdog that obtained the emails stated the swift assembly request being answered by the federal government exhibits how FTX evidently exerted main sway amongst regulators simply earlier than the trade got here underneath authorized scrutiny. Senate Democrats notably despatched a December 2022 letter to Gruenberg and Federal Reserve Chairman Jerome Powell that raised issues over why FTX and different corporations “could have had nearer ties to the banking system than beforehand understood.”

“Whereas the banking system has to date been comparatively unscathed by the newest crypto crash, FTX’s collapse exhibits that crypto could also be extra built-in into the banking system than regulators are conscious,” wrote Sens. Elizabeth Warren (D-MA) and Tina Smith (D-MN) of their letter — which requested whether or not businesses will examine the relationships between banks and cryptocurrency corporations.

The revelation of the assembly between FTX and Gruenberg comes after the Washington Examiner first reported in December 2022 on how Bankman-Fried and his then-FTX colleagues wined and dined Dan Berkovitz, a then-CFTC commissioner, whereas lobbying for favorable rules. Shortly after that story was printed, Berkovitz introduced he was departing from his function as normal counsel for the Securities and Exchanges Fee.

Bankman-Fried additionally advised Berkovitz in October 2021 that FTX was the pure option to be the ‘umpires of the crypto {industry},’” after Berkovitz described how he observed at an MLB sport that the league had a sponsorship settlement with the trade, the Washington Examiner reported. The MLB ended that settlement in November 2022.

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In August 2022, the FDIC despatched a stop and desist letter to FTX that instructed the trade to cease illegally “deceptive” shoppers in regards to the standing of their funds. The FDIC cited a July 2022 tweet by ex-FTX President Brett Harrison that claimed the FDIC insures cryptocurrency merchandise — which the company stated was “false.”

“In actual fact, FTX U.S. just isn’t FDIC-insured, the FDIC doesn’t insure any brokerage accounts, and FDIC insurance coverage doesn’t cowl shares or cryptocurrency,” wrote the FDIC.