As you know, there are many very fast-moving events related to these issues. While we have lots of materials below capturing much of that, we will be updating this webpage regularly, but for our latest views and commentary check us out on Twitter:
For years now, too many leaders on Wall Street and Washington either looked the other way or blindly supported the crypto industry as it worked relentlessly to infiltrate our financial system and rewrite the laws and rules to benefit their special interests. This was all greased by tens of millions of dollars in campaign contributions and lobbying, including by too many former public officials selling out their public service and engaging in influence pedaling.
Leaders (including regulators at the CFTC, elected officials in Congress, and blue-chip venture capital firms) who should have known better simply accepted the pixie dust of “innovation,” the fairytale of crypto riches, and FTX founder Sam Bankman-Fried’s claimed “vision.” They did so without doing the most basic due diligence or asking the most obvious questions if they thought it would make them rich or were already on FTX’s payroll directly or indirectly. (Better Markets refused FTX’s bribe of “$1 million or more” to support their radical and dangerous efforts to undermine consumer, investor and financial stability protections. Although that would have funded more than 25% of our annual budget, we stayed independent, clearly saw FTX’s troubling business plans and proposals, and aggressively opposed them at the CFTC and across Washington.)
The crypto industry followed the financial industry’s standard playbook of using all the levers of the influence industry to buy access and special treatment for its special interests at the expense of the public interest. One of the most corrupt aspects of that, which FTX used extensively, is a revolving door strategy of hiring former government officials, especially from the CFTC, to buy their unique inside knowledge, special access, and unfair influence at the agencies, in Congress and all across Washington to move FTX’s agenda.
Better Markets has stood against the crypto tidal wave of money, stood up to FTX’s powerful supporters (including at the CFTC and in Congress), asked the tough questions (including of Sam Bankman-Fried directly in our conference room), and aggressively opposed FTX’s radical and dangerous proposals.
In the wake of FTX’s implosion, many are now criticizing FTX and casting about for scapegoats, while trying to distract from their prior support and shilling. Don’t let them get away with it. Look at what people said and did before FTX collapsed and compare it to what they are saying now.
Also, many in Congress, at the CFTC, and in the crypto industry are claiming that FTX’s collapse shows that new legislation is needed. Shockingly, they are still pushing legislation that FTX endorsed and was FTX’s number one legislative priority. The CFTC Chair, who has been a high-profile, outspoken supporter of crypto and FTX, has gone so far as to irresponsibly say that such legislation should be passed “no questions asked,” even though most of the facts related to FTX’s collapse are not yet known. Moreover, the current laws and rules are fully capable of addressing almost all of the lawlessness going on in crypto. In fact, regulators at the banking agencies and the SEC withstood enormous political and industry pressure to allow crypto access into the core of the financial and banking system, which has helped prevent contagion, more crashes, and taxpayer bailouts.
Finally, FTX was registered, licensed, and supervised by the CFTC, which was so busy promoting crypto and trying to expand its jurisdiction that it failed to properly regulate the company. Rather than being an industry cheerleader, the CFTC should have used the regulatory powers it already had and, if it had, it just might have uncovered some of the misconduct, lax controls, and financial weaknesses that led to its collapse and harmed so many people. Better Markets suggested that they do that in its May 11, 2022 comment letter and in a June 16, 2022 letter to the CFTC Chair.
Below are resources on the FTX collapse, crypto, Washington’s revolving door and the role of regulators.
Dennis Kelleher Discusses FTX and the Future of Crypto on CNN (11/16/22)
Fact Sheet: Before the Senate Agriculture hearing on a crypto bill that was FTX’s main priority, we asked the CFTC and Members of Congress to consider 10 key questions about the legislation. (11/30/22)
Selected Additional Crypto Work
“These few emails show that the CFTC had an open-door policy to meet basically whenever FTX wanted to meet, including [with] the then-acting chair,” Dennis Kelleher, president of Better Markets, a nonprofit that advocates for financial regulation, told The Times. “FTX hired former CFTC officials for the purpose, obviously, to access and influence the CFTC, where FTX had a pending radical proposal to dramatically change the structure and operations of clearinghouses.”
“Critics are now calling for a pause in Washington in the wake of FTX’s collapse. ‘We don’t need more legislation. We need more money and support for regulators to go after what is fundamentally a lawless industry,’ said Dennis Kelleher, the president of Better Markets, which advocates for tougher financial regulation. ‘We need elected officials to prioritize the public interest rather than campaign contributors and lobbyists.”
“No one should be shocked by FTX’s demise,” Kelleher wrote in a scathing statement released on Sunday. “The fiction of crypto was visible to all who wanted to see.”
“FTX blurred the lines between corporate affairs and political activity, and prompted concerns among some involved about whether the money was being spent effectively and in compliance with strict campaign finance laws, while leaving some potential beneficiaries feeling like there was a quid pro quo.
“It was relentless and all-encompassing,” said Dennis Kelleher, the president of Better Markets, a nonprofit that fights for more regulation of financial firms.”
The Financial Times Tech Tonic podcast covers the crypto lobby’s enormous influence in its series “A sceptic’s guide to crypto.” They spoke with our Dennis Kelleher about the stunning amount of money being spent and how it could impact our entire financial system.
“Why is the contagion so limited? I asked that question of Dennis Kelleher, a co-founder of Better Markets, a nonprofit that advocates for financial regulation in the public interest. “The only reason we do not currently have a financial crisis, with a crash and with bailouts, is because regulators have withstood enormous pressure to allow interconnection and linkages between the crypto activities and the core of the financial and banking system.”
by Dennis Kelleher and Rob Nichols, president and CEO of the American Bankers Association
“Our organizations don’t always agree on banking policy. But today, as the warning lights blink on the economic dashboard and we confront both persistent inflation and the risk of a recession in the months ahead, we both agree that crypto companies and other nonbanks pose a significant and increasing risk to our financial system that needs to be better understood and regulated.”
The FTX proposal would encourage speculation, rather than finding stable prices, said Dennis Kelleher, president of Better Markets, a D.C.-based think tank that focuses on accountability, transparency and fairness in financial markets. The proposal “removes a historic layer of protection that has worked extremely well,” Kelleher said. “The markets are going to be transformed in a way that the interests of actual producers and purchasers are going to end up subordinated to speculators and financial products.”
During the panel, Dennis focused on the revolving door of the crypto industry and the need to prevent the lawless crypto industry from infecting the entire banking system and economy.