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Are Sam Bankman-Fried's Tens Of Millions Of Dollars In Congressional Bribes Still Potent?

Elizabeth Warren To The Rescue?

Congress hasn’t quite known what to do about crypto. Some say it’s a nothing but a Ponzi scheme— albeit a trillion dollar one— and needs to be exposed. Others say it needs to be regulated like all other financial services industries and others, often the ones who have taken immense sums of money from the industry, are enthusiastic advocates and want to keep regulations to an ineffective, unaccountable minimum. For example, yesterday two Republicans who took tens of thousands of dollars in stolen funds from Bankman-Fried and his FTX cohorts J.D. Vance (R-OH) and Katie Britt (R-AL) used yesterday's Banking Committee hearing— “Crypto Crash: Why Financial Safeguards are Needed for Digital Assets”— to warn about "over-regulating.” And that, after all, is precisely what Bankman-Fried and his cronies spent over $100 million to get.

One of the most corrupted of the Senate Democrats by Bankman-Fried is New York Senator Kirsten Gillibrand, and she’s fighting against regulation, just like any conservative Republican would. And she claims that she used to be a conservative but isn’t anymore. She’s been attacking Gensler flor cracking down on her donors. She’s been working with far right Wyoming Republican Cynthia Lummis to protect the crypto Ponzi schemers and scammers from effective regulation. In an interview, she said “I have many concerns about Chairman Gensler and his approach to this space. There are many, many companies that have asked to be regulated and who have been ignored for years.” Parroting her crypto donors, she has been running around shrieking that crypto policy is “Congress’s job, not the regulators’ job,” which is what Bankman-Fried paid her and other like her to say since members of Congress are usually much, much easier to bribe— Gillibrand and Lummis being perfect examples— than are heads of the SEC.

Stolen FTX funds bough Katie Britt a Senate seat

Yesterday, CNN reported that “In the three months since FTX filed for bankruptcy, state and federal regulators have escalated both their rhetoric and their actions to keep the fast-growing digital asset industry in check— a shift that is, unsurprisingly, not going over great with crypto companies… ‘While crypto contagion didn’t infect the broader financial system, we saw glimpses of the damage it could have done if crypto migrated into the banking system,’ the committee’s chairman, Sen. Sherrod Brown, said in his opening remarks. ‘These crypto catastrophes have exposed what many of us already knew: Digital assets— cryptocurrencies, stablecoins, and investment tokens— are speculative products run by reckless companies that put Americans’ hard-earned money at risk.’”

The hearing came a day after a regulatory crackdown on one of the world’s most popular stablecoins. On Monday, New York regulators ordered blockchain firm Paxos to stop issuing BUSD, aka Binance USD, citing “several unresolved issues” related to Paxos’ oversight of its relationship with crypto exchange Binance.
So-called stablecoins are digital tokens that maintain a one-to-one backing with US dollars or other fiat currency. Investors typically buy them to store money and facilitate deals within the cryptocurrency infrastructure, making them a bedrock of the crypto ecosystem.
…Paxos told customers they would be able to redeem their BUSD through February 2024, with options to redeem funds in US dollars or to convert their tokens to Pax Dollar, another stablecoin issued by the company.
At the same time, the Securities and Exchange Commission plans to sue Paxos, alleging that BUSD should have been registered under federal securities laws.
Paxos “categorically disagrees” with the SEC, it said in a statement Monday, “because BUSD is not a security under the federal securities laws.” The firm said it would “engage” with the SEC on the issue and is prepared to “vigorously litigate if necessary.” The firm declined to comment beyond its statement.
The BUSD news has clearly unsettled investors. Binance, which partnered with Paxos to launch the stablecoin in 2019, on Monday suffered one of its worst-ever days in terms of withdrawals with $873 million in net outflows, according to data provider Nansen.
The crackdown on BUSD and Paxos is just the latest instance of regulatory muscle-flexing in recent months — actions that are sowing confusion and frustration among crypto’s proponents, many of whom have sought regulatory clarity for years.
“Regulation by enforcement is puzzling for crypto enthusiasts,” said Marcus Sotiriou, market analyst at digital asset broker GlobalBlock, in a note. “People are desperately trying to figure out how to offer a product legally whilst getting zero guidance.”
In recent weeks, the SEC has leaned on a whack-a-mole enforcement strategy that critics say is unfairly targeting the nascent industry.
Last week, the SEC reached a $30 million settlement with crypto platform Kraken that will force the firm to unwind its “staking” practice, which allows investors to make passive yield on their crypto holdings.
The settlement immediately raised questions about other exchanges that offer staking, which crypto advocates say is vital to supporting the healthy function of some virtual currencies.
In January, regulators warned US banks and other market participants about the risks of fraud, volatility, and shoddy risk management in the crypto world.
“It is important that risks related to the crypto-asset sector that cannot be mitigated or controlled do not migrate to the banking system,” they said in a statement— the first-ever joint statement on crypto from the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

Politico noted that Elizabeth Warren’s hard line against crypto has been joined by far right extremists like Roger Marshall (R-KS). She’s building support “behind a bill that would have sweeping implications for the industry via tougher anti-money laundering restrictions, including requirements that more crypto service providers verify customer identities… Crypto advocates are resisting Warren’s push, and some dismiss her as an outlier. But her budding partnership with GOP lawmakers reflects broader forces that are poised to unite progressives and conservatives, watchdog groups and bankers, who share common cause in wanting to derail the unfettered growth of crypto. That’s in stark contrast to last year, before the crypto market meltdown, when digital currency lobbyists had gained serious traction with lawmakers who drafted friendlier, bipartisan legislation with the industry’s input.” Watch this video of Tom Emmer (R-MN), one of Congress’ worst crypto-bribe takers and now, as Whip, the 3rd ranking Republican in the House. This is how Republicans conduct oversight, when they’re paid enough:

And now one of the most corrupted on the crypto congressman, Jake Auchincloss (D-MA)-- son of a rich-- may be gearing up to primary Warren (laughable but crypto would be delighted to pay for his campaign and he takes lots of dirty money from every possible source anyway).

The loosely aligned camps of crypto skeptics have been emboldened by last year’s collapse of the FTX exchange, which revealed extensive industry mismanagement and led to the arrest of former CEO Sam Bankman-Fried.
“What matters to me is [Bankman-Fried] spread money around Capitol Hill like it was dishwater, and nobody stopped at the time to ask any relevant questions about this company,” said Sen. John Kennedy, a Louisiana Republican who has joined Warren’s effort to investigate crypto-friendly bank Silvergate, which is under scrutiny for its ties to FTX.
Crypto advocates have tried to reject Warren’s anti-money laundering bill in the strongest possible terms, criticizing it as a broad, unconstitutional threat to privacy that could sweep in a range of software products beyond just finance-focused digital assets. Some former regulators are also taking issue with the bill. [The crypto-industry profits are based almost entirely on money laundering for pariah states, drug deals and organized crime.]
The Treasury Department’s Financial Crimes Enforcement Network has already been policing illicit finance in crypto for years. Centralized crypto exchanges that register as money transmitters are required to verify their customers’ identities. Warren’s bill would extend those kinds of responsibilities to other entities, including digital asset wallet providers and crypto miners.
“It’s so vague and broad-reaching that just understanding and implementing its ramifications could take years,” said Hogan Lovells partner Liz Boison, a former federal prosecutor who also worked at the Consumer Financial Protection Bureau when Warren was launching the agency.
Lobbyists are also trying to brush it off for similar reasons.
“We have multiple senators who would probably filibuster something like this,” Blockchain Association CEO Kristin Smith said.

No doubt they do… senators and congressmen like Tom Emmer and House Financial Services chair Patrick McHenry who belong in prison for taking bribes. Besides, “Warren’s attempt to stake out a clear position and a well of support on crypto regulation will be a factor that top lawmakers will have to contend with if they want to advance new legislation aimed at digital currencies. ‘The crypto industry has an army of lobbyists and Washington insiders fighting against bipartisan rules to prevent crypto money laundering by criminals and rogue nations like Iran and North Korea,’ said Warren spokesperson Alex Sarabia. ‘There’s no reason that crypto should be held to a lower standard and not comply with the same rules for the same activities to address the same risks.’ Warren is zeroing in on national security concerns as her focus for potential crypto legislation, even as she raises red flags about a host of issues in the space, from consumer protections to environmental impact.”

Reporting for the Wall Street Journal yesterday, Dave Michels, Alexander Osipovich and David Benoit wrote that crypto investors are bracing for more crackdowns. Dramatically, the 3 began by informing their readers that “The walls are closing in around crypto. Regulators hadn’t taken action against many of the industry’s biggest players, but are now cutting off access to products and services central to the digital-currency business… The flurry of actions came after years of slow-moving investigations and debate in Washington over how to best handle the fast-growing industry. Some observers detected a shift in officials’ tone after the collapse of the FTX crypto exchange, which strengthened the hand of politicians and regulators calling for tougher enforcement. Now crypto executives are bracing for more regulatory lawsuits and investigations, and investors have started to flee suspected targets… Over a 24-hour period from Sunday to Monday, there were $2.7 billion worth of outflows from Binance, according to blockchain data provider Nansen. On Monday morning, some $144 million worth of BUSD were redeemed for dollars, according to Nansen. Paxos said Monday it ‘categorically disagrees’ with the SEC’s assertion that BUSD must comply with federal securities laws."

The SEC has been the crypto market’s principal cop since the beginning of the Trump administration, when regulators expressed interest in the novel technology underpinning cryptocurrencies. Many of the SEC’s earlier enforcement actions targeted smaller players, giving the market the impression that the industry’s best known brands were safer to deal with and faced less regulatory risk.
Then FTX, one of the world’s best-known trading platforms, failed in November after a report revealed its affiliated hedge fund, Alameda Research, was heavily exposed to an illiquid digital asset issued by FTX. The disclosure triggered a run on customer deposits that caused the firm and its affiliates to enter bankruptcy.
The FTX blowup emboldened the SEC, said Coy Garrison, a former regulator and now a partner at Steptoe & Johnson LLP who advises clients on crypto legal issues. “There is a political incentive to bring bigger cases post-FTX to be viewed as the responsible cop on the beat,” he said.
The SEC in January sued crypto lender Genesis Global Capital LLC and its partner Gemini Trust Company LLC, alleging that their program allowing users to earn interest on their crypto tokens violated securities laws. Gemini, which operates one of the largest U.S. crypto exchanges, has said it plans to fight the lawsuit.
Crypto executives have been spooked by last week’s settlement between the SEC and the Kraken crypto exchange, in which Kraken paid a $30 million penalty and agreed to stop offering so-called staking services to U.S. investors. The company didn’t admit wrongdoing.
The case suggests that the SEC might force other companies to stop offering access to staking, a practice in which investors lock up their digital assets such as ether or solana in return for an interest rate-like yield. The loaned assets allow the borrowers to facilitate transactions on the assets’ underlying blockchain network.
“This really should put everyone on notice in this marketplace,” SEC Chair Gary Gensler said on CNBC last week.
Services such as lending and staking have been available for years, but the SEC only recently took formal action against them. That has furthered the industry’s grievance that Mr. Gensler is uninterested in negotiating a bespoke regulatory regime for crypto. Instead, the SEC wants to impose its full Wall Street rulebook on the industry, industry officials say.
“You are starting to see opportunistic and uneven actions that are designed to try to bring major industry players and platforms within the SEC’s jurisdiction,” Mr. Garrison said. “They have a tenuous connection to investor protection. These products have been offered for a long time.”
…Gensler has warned since FTX’s fall that crypto companies, including the exchanges that are the hubs of the market, are running out of time to voluntarily comply with investor-protection rules. Mr. Gensler has dismissed crypto-industry claims that their market is too unique to coexist with SEC rules as a “talking point.”
Bank regulators appear to have cooled on crypto after a period during the Trump administration when they seemed more open to banks serving digital-currency companies. In early January, a trio of bank regulators issued a statement expressing skepticism that digital assets could be safely held by financial institutions. Within a week, Metropolitan Commercial Bank, a small New York bank that had dipped its toes into crypto, announced it was closing its crypto business.


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