US Lawmaker Questions Major Crypto Exchanges Over Consumer Protections Amid FTX Collapse

Ron Wyden, chairman of the US Senate Finance Committee, has requested information from six crypto companies on consumer protections in the wake of liquidity issues and the bankruptcy of FTX.

In separate letters dated Nov. 28, Wyden targeted Binance, Coinbase, Bitfinex, Gemini, Kraken, and KuCoin, requesting information about the protections exchanges have in place in the event of a failure like the one that occurred at FTX. The senator said crypto users who had funds with FTX had “no such protections” like those of banks or brokers registered with the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation.

“As Congress considers much-needed regulations for the crypto industry, I will focus on the clear need for consumer protections along the lines of long-existing assurances for customers of banks, credit unions, and brokers. in securities,” Wyden said. “If these protections had been in place before FTX’s failure, far fewer retail investors would face precipitous financial damage today.”

Wyden asked the six companies to provide answers to questions, including those about their subsidiaries, safeguards for consumer assets, use of customer data and protections against market manipulation by Dec. 12. The Senate Agriculture Committee has scheduled a hearing to explore the collapse of FTX. on Dec. 1, and Senators Elizabeth Warren and Sheldon Whitehouse called on the Justice Department to potentially prosecute those involved in wrongdoing during the exchange.

Related: FTX allegedly used Alameda bank accounts to process customer funds

In the other house, the House Financial Services Committee will conduct a similar investigative hearing on FTX on December 13. Speaker Maxine Waters and committee member Patrick McHenry backed the congressional action, with McHenry calling the events around the failed swap a “dumpster fire.”

FTX’s bankruptcy proceedings, currently underway in the District of Delaware, have revealed that the exchange may be liable to over a million creditors. The next hearing in the bankruptcy case is scheduled for December 16.