FTX Collapse Prompts SEC to Demand Crypto Disclosures

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Under the radar of regulators. Photo: Michael M. Santiago (Getty Images)

US financial regulators no longer want crypto-related surprises and shocks, but rather disrupt the market.

This is why the Securities and Exchange Commission (SEC) has advised publicly traded companies to publish updated and detailed information on how they have been affected by the recent upheavals in the cryptocurrency industry, caused by the fall of the crypto exchange FTX. He shared a sample letter yesterday that companies can use as a guide to meeting disclosure obligations (December 8).

Learning lessons from the Lehman crypto moment, the federal agency formed after the Wall Street crash of 1929 expects companies to address the direct and indirect impact of crypto asset market developments from various angles: quantity and quality of crypto assets bought and sold, material impact of price volatility. cryptographic assets on the business and finances, any funds lost or misappropriated due to bankruptcies, any policies in place to protect assets, and any risks related to legal proceedings, investigations, or regulatory impacts on the crypto markets. crypto assets.

The information-gathering exercise is an attempt to bring more transparency to a relatively opaque industry without a clear supervisor. Especially after the FTX implosion threw the industry into chaos, forcing companies to halt operations and, in extreme cases, declare bankruptcy, lawmakers want to hear from FTX founder Sam Bankman-Fried, who , despite his eagerness to give interviews on various platforms, missed a deadline. to respond to a request from a US Senate committee to testify on December 14.

Person of Interest: JPMorgan sues Jamie Dimon

Banking veteran Jamie Dimon has repeatedly deemed cryptocurrencies worthless, an assessment he doubled down on earlier this week.

In an interview with CNBC on Dec. 6, the JPMorgan chief called crypto a total sideshow and pet token. Linking the largely unregulated industry to several illicit activities, including ransomware, money laundering, counter-terrorism financing, tax evasion and sex trafficking, Dimon called for closer scrutiny: perhaps regulators beating banks should focus a bit more on cryptocurrency. said.

Company of interest: MicroStrategy

A few years ago, traditional businesses wouldn’t touch volatile digital coins with a barge pole. But over time, a handful of companies, including Elon Musks Tesla and Jack Dorseys Block, have amassed sizable crypto wallets. According to Yahoo! Finance, at least 15 companies, including Microsoft, Visa and Paypal, have had exposure to crypto either through investments, partnerships or side businesses.

Others like trading platform Coinbase Global, bitcoin miner Marathon Digital Holdings, and crypto-focused bank Silvergate Capital Corp have built or rebuilt businesses around the new-age asset.

The oldest and largest bet placed among public companies came from MicroStrategy.

In 2020, the business analytics platform co-founded by Michael Saylor adopted bitcoin as its primary reserve asset, the first established company to add digital currency to its balance sheet. The exposure cost MicroStrategy during the June bitcoin crash. Specifically, he wiped out over $1.2 billion. But Saylor’s faith is unshakeable. As of September 2022, MicroStrategy held 130,000 bitcoins.

Even after stepping down as CEO of MicroStrategy after 33 years at the helm in August, Saylor said he intends to focus more on bitcoin in his next job. The bitcoin bull, however, is not a supporter of all cryptocurrencies. He says that all alternative coins, especially the second largest market cap, Ethereum, commit securities fraud. He also called FTX unethical and illegal from the start.

Crypto needs regulation, says SEC chief Gary Gensler

They are not laundry tokens: promoters do marketing and the investing public buys most of these tokens, touting or anticipating profits based on the efforts of others, he said. Therefore, investors deserve to be informed to help them sort out which investments they think will prosper and which they think will fail. Investors deserve to be protected against fraud and manipulation. September Speech by SEC Chairman Gary Genslers

Back to the Beginning of the Crypto Crash: Founder of FTXs

The U.S. House Financial Services Committee, the first to announce an investigation into FTX’s collapse, has its first hearing scheduled for Dec. 13. A letter from Sen. Sherrod Brown called on FTXs Bankman-Fried to voluntarily confirm his attendance by the end of the day yesterday (December 8) or risk being subpoenaed.

Bankman-Fried, widely known as SBF, previously tweeted that he would appear before the committee after he finishes learning and looking into what happened, but that may not happen as of the hearing. Committee chair Maxine Waters called his lack of understanding of the situation a bluff, citing the many tweets and media appearances he has made, and said it was imperative he attend.

On Dec. 8, Waters debunked articles claiming she wouldn’t force SBF’s testimony, tweeting, A subpoena is definitely on the table.

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