Elizabeth Warren demands answers from FTX following crypto firm’s collapse

Senator Elizabeth Warren has long warned about the dangers of cryptocurrencies.SARAHBETH MANEY/NYT

Massachusetts Senator Elizabeth Warren, who has long warned about the dangers of cryptocurrencies, is seeking answers from FTX and its former leader, Sam Bankman-Fried, after the crypto exchange imploded last week in a still-evolving saga.

Warren and Senator Richard Durbin of Illinois sent a letter on Thursday addressed to FTX, Bankman-Fried, and the company’s new chief executive, John Jay Ray III, who helped Enron navigate its bankruptcy process. The senators requested information and answers to questions related to the misuse of billions of dollars in customer funds and other allegations of fraud.

“While the full extent of the damage wrought by FTX and its affiliates continues to unfold, billions of dollars-worth of investor funds seem to have disappeared into the ether,” they wrote. “These massive losses raise questions about the behavior of former FTX CEO Sam Bankman-Fried and other company executives, the apparent lack of due diligence by venture capital and other big investment funds eager to get rich off crypto.”

In the letter, the senators recounted all of the information that has surfaced this month about FTX, a crypto firm once heralded as one of the more trustworthy players in the sector.

The allegations include that Bankman-Fried transferred $10 billion in FTX customer assets to sister company Alameda Research, a trading firm he founded, to fund risky bets — a move that was hidden from auditors but known to executives. Warren is asking for an explanation about reports that FTX built a secret “back door,” which allowed it to transfer funds between the companies, and how $1.7 billion in FTX customer assets have “gone missing.”

Warren is a proponent of creating a tough regulatory framework for the US crypto market. After Boston-based Fidelity Investments launched a program in the spring allowing some workers a bitcoin option in their 401(k) plans, Warren wrote a letter to CEO Abigail Johnson opposing the idea, calling crypto a “risky and speculative gamble.”

Warren asked for all related FTX documents and answers to be provided no later than Nov. 28. FTX and its affiliate companies filed for Chapter 11 bankruptcy last Friday.