Crypto “non-compliance is not gonna work,” Gary Gensler said to FTX, or did he?

Key Takeaways:

  • SEC Chair Gary Gensler met with FTX chief before the crash
  • Gensler claims that he told Sam Bankman-Fired that "non-compliance is not gonna work."
  • The crash happened on the SEC's watch, but no one has the answer how to avoid it in the future.

YEREVAN (CoinChapter.com) – Securities and Exchange Commission (SEC) Chair Gary Gensler has previously voiced his distrust in crypto exchanges and asserted that he didn’t see them lasting long. Moreover, he reiterated his stance on the matter during CNBC’s Squawk Box on Nov 10.

"Non-compliance is not gonna work," Gary Gensler said to FTX, or did he?

Gary Gensler met with Sam Bankman-Fried

Sam Bankman-Fired, the founder of the recently collapsed crypto exchange FTX, met with the SEC Chair on March 29, 2022, answering Gensler’s famous call to “come in and talk.” Moreover, Squawk Box host Andrew Ross Sorkin lost no time in asking the official a direct question about the meeting.

Gary, you said people should come in. Sam Bankman-Fried[…] came in and actually met with you along with Brad Katsuyama of IEX, someone who has draped himself in the flag of an honorable exchange. Do you feel like you were hoodwinked?

asked the host.

However, Gensler failed to provide a definitive answer about the exchange’s eventual non-compliance.

I think we’ve been clear in these meetings. […] Same message to the public, same message to them that non-compliance is not going to work. The public is going to be hurt. And if we need to going to be the cop on the beat, going into court, putting the facts and the law in front of judges.

answered Gensler, not, in fact, saying anything.

Investors got robbed “on SEC’s watch.”

Sorkin also asked Gensler what answer he would give critics that blame the SEC for the lack of regulatory frames for the crypto market. Calling him the ‘cop on the beat,’ the host inquired on the state of the ‘battle’ between the SEC and the CFTC over who’s in charge.

I think there’s work for both of us market regulators as well as other regulators around anti-money laundering and sanctions. I mean, this field really needs to come into compliance, and in terms of our efforts of the SEC, I can’t be prouder of the staff […].

said Gensler.

However, the Chair cited “limited resources,” which can’t match the task of “overseeing a $100 trillion capital market.”

Also read: Look at these three bank runs before you $#!T on FTX and crypto sector.

Gensler pointed to the “legal loopholes”?

Gensler’s warning of non-compliance didn’t work for FTX in the end, but SEC involvement can hardly get the credit (or the blame). After the FTX crash, Bankman-Fired apologized, saying he “f***ed up and should have done better.” That apology does nothing to console the lenders, to whom he owes $650 million, though. But cop-on-the-beat Gensler apparently jumped ship.

Meanwhile, Republican Congressman Tom Emmer alleged that Gensler not only knew what Bankman-Fired was up to but was in on the action. The Congressman shamed the rival-Democrat Gensler for helping Bankman-Fired “find legal loopholes to obtain a regulatory monopoly.”

Gary Gensler, Crypto “non-compliance is not gonna work,” Gary Gensler said to FTX, or did he?

Regardless of whether Gensler was “hoodwinked” or knew full well that FTX would leave lenders empty-handed, Emmer did not provide any proof of his words. So, it is not clear whether the accusation came as a token of political rivalry or whether the Congressman has evidence to back his opinion.

Either way, it doesn’t look like investors, who Gensler claims to protect above all, will see their money back anytime soon.

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Gary Gensler, Crypto “non-compliance is not gonna work,” Gary Gensler said to FTX, or did he?

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