Michael Novogratz, CEO of crypto investment firm Galaxy, predicted in a YouTube video that members of Congress will grill Gary Gensler, the chair of the U.S. Securities and Exchange Commission (SEC), over perceived failures of the agency to take actions that might have prevented crypto companies such as the now-bankrupt exchange FTX from misusing customer funds.
Novogratz noted that he sees some Republican members of Congress as very pro-crypto, including Rep. Patrick McHenry (NC-10), chairman of the House Financial Services Committee, and Rep. Tom Emmer (MN-06). Novogratz said he thinks large donations from the now-disgraced founder of FTX Sam Bankman-Fried have made Democrat lawmakers more hesitant to endorse the crypto industry, although Bankman-Fried donated to both sides of the aisle.
"I think the Republicans – McHenry, who's running the Banking Committee now, Tom Emmer is a great fan of crypto, who's the majority whip from Minnesota – (are) pro-crypto and they're going to rake Gensler across the coals for his performance at the SEC, and it's going to be pretty politica," Novogratz said on the Real Vision Crypto podcast. "I think unfortunately, the Democrats, who were all becoming crypto people – it was going to be bipartisan – now feel like, 'Oh, I've got to back away,' because now they've got Sam Bankman-Fried's stink over all of them. I actually read that Sam gave money to like 70% of all Congressmen. And so that part of it I think is going to make it harder for Dems to be like, 'Oh yeah, crypto's great.' It'll burn through."
Novogratz previously worked as a partner and president of Fortress Investment Group and as a partner of Goldman Sachs, according to the Galaxy website. He also previously served on the New York Federal Reserve’s Investment Advisory Committee on Financial Markets.
One month after crypto exchange FTX filed for bankruptcy, the U.S. Securities and Exchange Commission (SEC) released new guidelines which require firms that issue securities to disclose their exposure to the crypto market to investors, CNBC reported. The new guidelines also direct companies to disclose any digital asset holdings in public filings. Gensler has faced criticism from some who believe his agency should have done more to prevent the improper use of customer funds by crypto companies.
Minnesota Congressman Tom Emmer criticized Gensler in a Dec. 10 tweet, writing “We now know Gensler’s crypto information-gathering efforts were ineffective,” Coin Telegraph reported.
Emmer also referenced a bipartisan Blockchain Caucus letter, which he co-authored that was sent to Gensler in March. Emmer said in a tweet that Gensler “declined to provide Congress with the information requested in the letter, which would’ve informed Congress of the apparent inconsistencies in Gensler’s approach that caused him to miss Terra/Luna, Celsius, Voyager and FTX.” Emmer called on Gensler to “testify before Congress and answer questions about the cost of his regulatory failures.” The Blockchain Caucus letter authors called the SEC’s information gathering process on crypto companies “haphazard and unfocused” rather than “targeted, intentional or clear.” Gensler took two months to respond to the letter, and Emmer said the chairman avoided answering questions related to the methods the SEC would use to add oversight to the crypto industry.
A Change.org petition titled "Fire Gary Gensler as SEC chairman for obstruction of justice and Collusion with FTX" had collected more than 30,000 signatures as of Feb. 1. The petition description states, "Mr. Gensler is guilty of obstruction of justice due to his lack of enforcement of the laws pertaining to naked short selling and lack of competent oversight of market maker activities. Due to Mr. Gensler's crimes, millions of retail investors were defrauded of countless MILLIONS of dollars."
After FTX's bankruptcy filing in November, close ties between Bankman-Fried and his parents and prominent political figures and regulatory agencies were uncovered, leading to suspicion in the crypto community that Gensler might have helped Bankman-Fried find and exploit legal loopholes, Crypto News reported.
Bankman-Fried publicly donated approximately $40 million during the 2022 election cycle, the majority of which went to Democrat candidates, while approximately $200,000 went to Republican candidates, Market Watch reported. Some recipients, such as Sen. Kristin Gillibrand (D-NY), said they donated the contributions they received from Bankman-Fried after it came to light that he had been improperly using FTX customers' funds. In December, the Department of Justice hit Bankman-Fried with eight criminal charges, including one related to allegedly violating campaign finance laws.
