Top House Committee to Hold Hearing Into FTX Collapse

The House Financial Services Committee will hold a hearing into FTX next month, the committee announced Wednesday.

Rep. Maxine Waters (D-Calif.) and Rep. Patrick McHenry (R-N.C.), respectively the chair and ranking member of the committee, said in a joint statement that the lawmakers would want to hear about the collapse of the crypto exchange and its "broader consequences" for the cryptocurrency ecosystem. The committee plans to hear testimony from now-former FTX CEO Sam Bankman-Fried and representatives from FTX, its sister company, Alameda Research, and Binance, which briefly suggested it would acquire FTX.

FTX's collapse harmed over a million users, Waters said in a statement,

"Unfortunately, this event is just one out of many examples of cryptocurrency platforms that have collapsed just this past year," she said. "... [I] know that we need legislative action to ensure that digital assets entities cannot operate in the shadows outside of robust federal oversight and clear rules of the road."

In his own statement, which called FTX's failure a "debacle," McHenry said the committee needs to understand what happened for FTX's customers and the American public, citing Congress' role in oversight.

"It’s essential that we hold bad actors accountable so responsible players can harness technology to build a more inclusive financial system," he said.

FTX filed for bankruptcy last week, days after CoinDesk reported a balance sheet belonging to Alameda held a large amount of FTX's own FTT token, raising questions about the amount of real money on either company's books.

The early days of the bankruptcy filing were chaotic. FTX US, which said it wouldn't suspend withdrawals, temporarily did. The parent exchange was hacked on Friday night. And the Securities Commission of the Bahamas said over the weekend that it hadn't ordered FTX to allow local users to withdraw funds, contradicting the reason FTX gave for re-enabling withdrawals in the country days after suspending all withdrawals.

Numerous federal and state regulators are currently investigating FTX.

In a hearing on bank regulators, McHenry expanded on his views, calling it a "dumpster fire" and taking aim at Securities and Exchange Commission Chair Gary Gensler for being "more interested in chasing headlines than bad actors."

"FTX users have been left out to dry. The digital asset ecosystem is in limbo," he said. "... “We’ll explore all of this at the upcoming hearing but let me say this: Congress must develop a clear regulatory framework for the digital asset ecosystem, including trading platforms."

Read more: FTX's New Leadership Is in Touch With Regulators, May Have Over 1M Creditors, New Filings Say

UPDATE (Nov. 16, 2022, 15:20 UTC): Adds additional context.

UPDATE (Nov. 16, 2022, 16:00 UTC): Adds a quote from McHenry.