The move sparked a panic, with FTX customers racing to pull $5 billion worth of deposits off the platform. In a last-minute bid to meet the demands, Bankman-Fried turned to Zhao for help, and the Binance chief executive agreed to buy FTX. But Zhao reneged the next day, saying that a review of FTX’s books revealed “mishandled customer funds.” Two days later, Bankman-Fried stepped down, and the company said it was filing for bankruptcy.
Other witnesses included Hillary Allen, an American University law professor of banking and securities regulation; Jennifer Schulp, who studies financial markets at the conservative Cato Institute; and Ben McKenzie Schenkkan, an actor and star of TV hits “The O.C.” and “Gotham.” McKenzie Schenkkan has become one of the crypto industry’s unlikely but most prominent critics, arguing that it is a bubble filled with malefactors. He is co-writing a book on the industry set to publish this summer.
The hearing came as Brown signaled a desire to work with top financial regulators to forge a federal rule book for the crypto industry. Other members of the panel have their own proposals, and Sen. Elizabeth Warren (D-Mass.) is adding to them with a bill — co-sponsored by Sen. Roger Marshall (R-Kan.) — aimed at cracking down on national security risks posed by cryptocurrency. The measure seeks to more strictly apply anti-money-laundering standards already imposed on traditional financial institutions to crypto businesses.
If convicted, Bankman-Fried faces up to 115 years in prison related to the charges brought by regulators and prosecutors. He appeared to fight the United States’ extradition request during an appearance in a Bahamian court Tuesday. A judge ordered him held without bail after local prosecutors argued that he was a flight risk and could have money stashed in other countries.
Wednesday’s Senate proceedings came a day after the House Financial Services Committee held a hearing that included John J. Ray III, FTX’s new CEO, who was brought in to clean up the company’s finances. Ray called Bankman-Fried’s actions “plain old embezzlement.” Ray said it would take “months, not weeks” to claw back lost consumer deposits, noting that “we’re not going to be able to recover all the losses here.”
But FTX also pursued major marketing ploys to boost consumers’ faith in the industry. It purchased advertising space on the uniforms of Major League Baseball umpires. The National Basketball Association’s Miami Heat said it would terminate its $135 million arena naming-rights deal with FTX in the wake of the company’s collapse. The agreement, signed in 2021, was intended to last 19 years.
Since FTX’s collapse, politicians have grappled with how to distance themselves from Bankman-Fried. In the two years leading up to November’s midterm elections, the crypto executive donated $40 million to federal candidates and campaign groups, according to federal records. Most of his money went to Democrats, though Bankman-Fried has alluded to additional, undisclosed contributions to Republicans.