SEC Chair Gary Gensler is facing scrutiny for a virtual meeting he reportedly held with Sam Bankman-Fried, the founder and former CEO of crypto exchange FTX, without obtaining the necessary permission. Michael Chamberlain, director of the watchdog group Protect the Public's Trust, said the relationship between Bankman-Fried and Gensler is one that Gensler should have "resisted" due to his position in public office.
“The episode appears to represent everything the American public hates about Washington, D.C. It seems clear from information that has been made public that [Bankman-Fried] and his colleagues were looking to leverage political donations and connections into influence with the officials that would be regulating and overseeing them,” Chamberlain said in a statement. “This behavior is nothing new or even unusual, and Americans should be able to trust that their public servants would be able to resist such efforts. Unfortunately, as we have often revealed, that is all too frequently not the case.”
Gensler and Bankman-Fried had a 45-minute Zoom call in March 2022, six months before FTX collapsed and Bankman-Fried was arrested on fraud charges, raising questions about potential conflicts of interest between the "disgraced crypto mogul" and the regulator, the New York Post reported. A Freedom of Information Act request revealed no evidence that Gensler obtained permission to hold the meeting from the SEC's Office of the Ethics Counsel, which experts say violates the SEC's protocol. Experts also told the New York Post that if Gensler had requested permission for the meeting, it is unlikely he would have received it.
An SEC spokesperson has claimed that Gensler did obtain permission for the meeting but has not provided documentation to support that claim, according to the New York Post. SEC sources said those requests typically take place via email in order to ensure a paper trail. “The reason you put it in an email is you want to get it in writing so you can cover your ass,” one former SEC official reportedly told On The Money. “What’s the point of doing it if it’s not in writing?” A former counsel at the SEC said, “It’s a little suspect to me that the SEC is disputing FOIA but won’t back it up."
Thomas Jones, president of the American Accountability Foundation, questioned why Gensler would have met with Bankman-Fried given that little information was known about FTX at the time, and the exchange was not headquartered in the U.S., according to the New York Post. “It’s a huge failure in judgment from Gensler,” Jones said. “It speaks to Washington’s ‘swampy-ness’ that Gensler would take that meeting.” Jones also noted that 45 minutes is an "eternity" for an SEC chair. “Carving out that much time is a big lift," he said. Congressman Ritchie Torres (D-NY) has criticized Gensler's actions pertaining to FTX, saying, "When it comes to government failure, the public official singularly responsible for failing to expose the FTX fraud is SEC Chair Gary Gensler."
Bankman-Fried is facing 13 criminal charges related to his misuse of customer funds, which led to the bankruptcy of his exchange. According to ABC, Bankman-Fried is accused of using customer assets to purchase real estate, make political donations, and cover losses at Alameda Research, his hedge fund.
The November collapse of FTX resulted in billions of missing funds owed to its creditors, NerdWallet reported. The collapse also led to the demise of multiple other crypto companies that had exposure to FTX and shook confidence in the industry.
Bankman-Fried's trial is set to begin in early October. He was extradited from the Bahamas on Dec. 21, and on Dec. 22 he posted a $250 million bail and has since been residing with his parents in California, according to NPR.
