Rep. Torres asks US GAO to investigate SEC ‘failure’ to protect public against FTX

Torres is a crypto supporter who has questioned the performance of the SEC before; he has written new legislation on crypto companies’ proof of reserves and comingling of funds.

An American legislator has asked the United States Government Accountability Office (GAO) to look into the performance of the Securities and Exchange Commission (SEC) regarding the recently failed crypto exchange FTX. 

Rep. Ritchie Torres wrote to U.S. Comptroller General Gene Dodaro on Dec. 6 requesting that the GAO, the federal legislative watchdog, conduct a review of the SEC’s failure to protect the public from “the egregious mismanagement and malfeasance of FTX.” The strongly worded letter also criticized chairman Gary Gensler’s leadership in general. Torres wrote:

“If the SEC had done the due diligence of thoroughly investigating the financials of FTX, there would have been a greater likelihood of exposing the crypto exchange for what it truly is: a house of car[d]s built on monopoly money printed out of thin air.”

Aside from that passage, Torres’ letter was almost completely devoted to a critique of SEC chair Gensler, who “by the logic of his own public pronouncements, is singularly responsible for regulatory failures surrounding the collapse of FTX and its affiliate FX US.” Addressing Gensler’s insistence that the majority of cryptocurrencies are securities and therefore subject to SEC regulation, Torres asked rhetorically:

“If the SEC has the authority [as] Mr. Gensler claims, why did he fail to uncover the largest crypto Ponzi scheme in US history?”

Torres, like Gensler, is a Democrat, and he represents the South Bronx in New York City. He is a vocal proponent of cryptocurrency. Ironically, he cosigned a bipartisan letter headed up by Rep. Tom Emmer questioning the SEC’s authority to seek information from crypto companies in March. Emmer has also questioned Gensler’s oversight in the wake of the FTX collapse.

Related: Will SBF face consequences for mismanaging FTX? Don’t count on it

On Dec. 2, Torres introduced bills to the House of Representatives titled “To require certain cryptocurrency exchanges to make disclosures relating to proof of reserves to the Securities and Exchange Commission, and for other purposes” and “To prohibit lending, leveraging, or co-mingling customer funds by cryptocurrency exchanges without consent of a customer.” The bills have been referred to the House Financial Services Committee.

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