US lawmaker questions major crypto exchanges on consumer protection amid FTX collapse

US senator launched a probe to investigate the safeguards that Binance, Coinbase, Bitfinex, Gemini, Kraken, and KuCoin had in place in case of another incident like the one that happened with FTX. 

Ron Wyden, Chairman of the U.S. Senate Finance Committee, has asked six crypto firms to provide information on consumer protection in the wake of FTX's liquidity issues and bankruptcy.

On Nov. 28, Sen. Ron Wyden wrote to Binance, Coinbase, Bitfinex, Gemini, Kraken and KuCoin, inquiring about the safeguards each exchange had to protect customers in case of failure, like the one that happened at FTX. He highlighted the fact that crypto users with funds at FTX had ''no such protections'' that banks or registered brokers offer through the Federal Deposit Insurance Corporation or 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 the assurances that have long existed for customers of banks, credit unions and securities brokers,” said Wyden. “If these protections had been in place before the failure of FTX, far fewer retail investors would be facing precipitous financial harm today.” 

Sen. Ron Wyden has asked six firms to answer questions regarding their subsidiary companies, consumer asset protection, use of customer data, and anti-market manipulation efforts by Dec. 12. On Dec. 1, the Senate Agriculture Committee will hold a hearing to investigate the fall of FTX. Moreover, US Senators Elizabeth Warren and Sheldon Whitehouse have urged the Justice Department to prosecute those found to have committed wrongdoings at the exchange.

The House Financial Services Committee will also be investigating the FTX on Dec. 13. Chair Maxine Waters and ranking member Patrick McHenry have both expressed their support for the congressional action, with McHenry describing the situation as a "dumpster fire." 

Bankruptcy proceedings for FTX are currently taking place in the District of Delaware, with the potential of the exchange being liable to over 1 million creditors. The following hearing will be on Dec. 16.



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