US Senators want justice department to hold FTX execs accountable for collapse

Senators Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I) wrote a letter to the United States Department of Justice (DOJ) to express their concern regarding the FTX implosion.

Warren and Whitehouse requested in the Nov. 23 letter that the DOJ hold the executives of FTX “accountable to the fullest extent of the law” for the allegations of fraud and illicit behavior that led to the eventual collapse of the exchange, valued at $32 billion only a short while ago.

The senators noted the impact FTX has had on companies including Genesis’ $175 million locked up in an FTX trading account, Galois Capital’s $100 million locked in its FTX account, and BlockFi having to halt withdrawals and prepare to file for bankruptcy. 

It was also noted within the letter that FTX wants to discharge its debts to customers – many of whom are retail investors – of up to $8 billion.

SBF confessed in an investor meeting that Alameda Research owed FTX an estimated $10 billion in customer deposits that were lent out without customer consent. This is considered a violation of both FTX’s own terms of service and of U.S securities law.

Warren and Whitehouse state in the letter that “FTX created a false sense of safety and legitimacy and encouraged consumers to pour their hard-earned money into investments on the exchange.”

Prior to the FTX collapse, Sam Bankman-Fried (SBF) assured customers that “FTX has enough to cover all client holdings. We don’t invest client assets (even in treasuries).” A statement which has since been proved false and the original tweet deleted.

Calling out former-CEO Sam Bankman-Fried (SBF) for trying to minimize the concerns prior to the collapse, the senators state that it was clear SBF and the company representatives “were lying.”

 “The fall of FTX was not simply a result of sloppy business and management practices, but rather appears to have been caused by intentional and fraudulent tactics employed by Mr. Bankman-Fried and other FTX executives to enrich themselves,”

The senators concluded the letter by imploring the DOJ to prosecute those responsible for the harm brought onto the victims of the exchange’s collapse.

The new FTX CEO, John Jay Ray III, the man that managed the historic bankruptcy of energy trading giant Enron, has since shed light on the negligence displayed by Sam Bankman-Fried – describing it as “a complete failure of corporate control.”