• In a letter addressed to the GAO, Torres criticizes SEC chair Gary Gensler for claiming exclusive regulatory dominion over crypto exchanges while simultaneously failing to meaningfully regulate them.
• Torres accuses Gensler of being “singularly responsible” for the regulatory failures surrounding FTX’s collapse and calls upon him to resign.
Gensler now under the microscope
Democratic congressman Ritchie Torres is calling for an independent investigation into the U.S. Securities and Exchange Commission’s (SEC) failure to prevent the collapse of crypto exchange FTX. In a letter addressed to the Government Accountability Office (GAO), Torres accused SEC Chair Gary Gensler of being “singularly responsible” for the regulatory failures surrounding FTX’s collapse and called upon him to resign.
Torres’s letter criticized Gensler for claiming exclusive regulatory dominion over crypto exchanges while simultaneously failing to meaningfully regulate them, leading to disaster with FTX. The Congressman argued that Gensler’s actions were a direct cause of the massive economic impact of FTX’s closure, which resulted in hundreds of traders suffering major losses.
The Congressman went on to urge the GAO to conduct an independent investigation into how this situation was allowed to happen in order to identify any potential violations or conflicts of interest by those involved in overseeing crypto markets and/or FTX itself. He also requested that any findings from such an investigation be shared with Congress as soon as possible so that appropriate action can be taken if necessary.
FTX had been operating since 2018 but abruptly announced its closure in March 2021 due to alleged financial issues, resulting in customers losing millions of dollars worth of assets stored on the exchange. At that time, Gensler defended his decision not to use his authority as head of the SEC to act more swiftly against FTX, despite claims from some observers that he should have done more due to his oversight role over crypto markets.
In light of all this, Torres argued that it is now essential for an independent review into what happened at FTX and why it was allowed to fail despite Gensler’s position at the top of the SEC food chain. Such a review could help ensure that similar situations are avoided in future by improving oversight rules and enforcement mechanisms for virtual currency exchanges and other such platforms based on distributed ledger technology (DLT). It could also provide insight into potential conflicts between Gensler’s role as both regulator and overseer when it comes to virtual currency markets.
Ultimately, Torres believes an independent investigation would serve as an important tool for restoring confidence in financial services related to DLT-based products and platforms—a necessary step if we are ever going to see meaningful adoption from mainstream investors who have been spooked by cases like this one involving FTX.
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