FTX declared bankruptcy This month with $900 million in assets versus $9 billion in liabilities. Its founder and former CEO, Sam Bankman-Fried, is being questioned by police in the Bahamas, and many customers are unable to withdraw their deposits. Its holdings of Serum’s SRM, a Bankman-Fried-developed token, fell from more than $2 billion to less than $100 million. Things got worse over the weekend after FTX was apparently hacked, resulting in the loss of hundreds of millions more. Some commentators are already calling it the “Lehman moment” for cryptocurrencies, a reference to the collapse of Lehman Brothers in 2008 that indicated we were in a financial crisis.
In the aftermath of this epic meltdown, Congress must dig its head out of the sand and pass Digital Goods Consumer Protection Act The Commodity Futures Trading Commission, or CFTC, is set to regulate the cryptocurrency industry. The agency that regulates the trading of commodities and derivatives, has already taken on a role in crypto regulation, and share duties with the Securities and Exchange Commission, or SEC. Both agencies are on shaky ground, as there is no legislation designating an enforcement agency or defining whether cryptography is security or derivative. Both have launched investigations into FTX’s handling of customer accounts.
Brendan Cochrane, Esq. CAMS is the blockchain and cryptocurrency partner of YK Law LLP. He is also the President and Founder of CryptoCompli, a startup focused on the compliance needs of cryptocurrency companies.