Sam Bankman-Fried scored meeting with top regulator, tried to win influence before collapse: Emails
Gabe Kaminsky
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EXCLUSIVE — Disgraced ex-cryptocurrency kingpin Sam Bankman Fried and his since-bankrupt company FTX scored a meeting with a top regulator and sought to sway them to adopt industry-friendly rules months before the exchange’s historic collapse, emails show.
In May 2022, FTX pitched the Federal Deposit Insurance Corporation on why it was apparently poised to be a “superior” cryptocurrency exchange and was swiftly granted a meeting with its chairman, Martin Gruenberg, according to emails obtained by the watchdog Protect the Public’s Trust and shared with the Washington Examiner.
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“It seems that Sam Bankman-Fried and his colleagues at his failed firm FTX were looking to influence crypto regulations to their advantage,” Michael Chamberlain, director of the watchdog group, told the Washington Examiner. “Perhaps we should consider ourselves fortunate because, were it not for FTX’s precipitous collapse, the executives now facing federal indictments may have been the primary drivers of government oversight of themselves and their competitors.”
FTX was on a lobbying spree to gain influence in Washington before its November 2022 collapse, which was due to it allegedly diverting customer funds to Alameda Research, a defunct-company Bankman-Fried co-founded. Bankman-Fried plead not guilty in January to a slew of criminal charges, including wire fraud and money laundering.
On May 28, 2022, FTX’s-then policy head Mark Wetjen, a former commissioner of the Commodity Futures Trading Commission, sent a lengthy email to Gruenberg that touted the exchange’s success and requested a meeting. The CFTC regulates derivatives and is tasked with protecting the public from fraud.
“We hope this message finds you well,” Wetjen emailed Gruenberg. “I wanted to follow up on my note from Thursday (sorry for the last-minute request!) and see if you might have time the week of June 13 to meet with me and Sam Bankman-Fried, the founder and CEO of FTX, one of the largest crypto exchanges globally.”
In the email, Wetjen discussed FTX’s “risk model,” which pertained to its application pending before the CFTC to amend regulations that would pave the way for more federally authorized cryptocurrency product offerings. The application pertained to bitcoin and ethereum, the two most widely traded coins that maintain the highest market caps.
“Sam and I have worked in traditional market structures, and I strongly believe the FTX model is all things considered a superior model,” Wetjen continued in his email. “We are in the unusual position of begging the federal government to regulate us. … We would be thrilled to explain these points further in person if you are amenable to a meeting. And to the extent the crypto industry comes up in discussions through FSOC [Financial Stability Oversight Council] or otherwise, we wanted you to have this context and our views at FTX about where the federal government should keep its focus as it considers the risks posed by the crypto industry.”
Later that evening, Gruenberg replied and accepted Wetjen’s request.
“Good to hear from you,” Gruenberg wrote. “Hope all is well with you too. Sorry to take so long to respond to your previous email. I’d be glad to meet with you and Mr. Bankman-Fried. If it’s OK, I’ll ask my assistant, Diane Armstrong, to follow up with you to find a convenient day and time during the week of June 13. Enjoy the rest of the weekend.”
Wetjen wrote back roughly one hour later, “Thanks very much Marty.”
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Julianne Breitbeil, a spokeswoman for the FDIC, confirmed to the Washington Examiner that a “single meeting” took place.
“Chairmen of the FDIC have routine courtesy visits with leaders of financial firms and institutions,” she said.
Still, the watchdog that obtained the emails said the swift meeting request being answered by the government shows how FTX evidently exerted major sway among regulators just before the exchange came under legal scrutiny. Senate Democrats notably sent a December 2022 letter to Gruenberg and Federal Reserve Chairman Jerome Powell that raised concerns over why FTX and other firms “may have had closer ties to the banking system than previously understood.”
“While the banking system has so far been relatively unscathed by the latest crypto crash, FTX’s collapse shows that crypto may be more integrated into the banking system than regulators are aware,” wrote Sens. Elizabeth Warren (D-MA) and Tina Smith (D-MN) in their letter — which asked whether agencies will investigate the relationships between banks and cryptocurrency firms.
The revelation of the meeting 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, while lobbying for favorable regulations. Shortly after that story was published, Berkovitz announced he was departing from his role as general counsel for the Securities and Exchanges Commission.
Bankman-Fried also told Berkovitz in October 2021 that FTX was the natural choice to be the ‘umpires of the crypto industry,'” after Berkovitz described how he noticed at an MLB game that the league had a sponsorship agreement with the exchange, the Washington Examiner reported. The MLB ended that agreement in November 2022.
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In August 2022, the FDIC sent a cease and desist letter to FTX that instructed the exchange to stop illegally “misleading” consumers about the status of their funds. The FDIC cited a July 2022 tweet by ex-FTX President Brett Harrison that claimed the FDIC insures cryptocurrency products — which the agency said was “false.”
“In fact, FTX U.S. is not FDIC-insured, the FDIC does not insure any brokerage accounts, and FDIC insurance does not cover stocks or cryptocurrency,” wrote the FDIC.