SEC chairman Gary Gensler, a balding white man in a dark suit, gestures animatedly with his hands while sitting at a microphone to testify before a Congressional hearing
Photo: Tom Williams/CQ-Roll Call, Inc via Getty Images

Did the FTX crash vindicate Gensler?

Protocol Fintech

Good morning, and welcome to Protocol Fintech. This Tuesday: Blaming Gensler, California suspends BlockFi, and SBF is asking, “What happened?”

Blaming Gary Gensler

FTX founder Sam Bankman-Fried triggered the latest crypto meltdown. But in a quirky twist in the FTX saga, the crypto industry is also blaming SEC Chair Gary Gensler.

SBF ran his business in a place with loose rules. And that was partly because Gensler’s hard-nosed attitude is driving crypto out of the U.S., crypto leaders are arguing.

  • FTX was “able to do what it did … because it operates in the Bahamas” where there is “very little regulatory oversight and ability to oversee financial services businesses,” Coinbase CEO Brian Armstrong said in an op-ed Friday.
  • “Did regulators force FTX to conduct itself in the way it did? No,” Armstrong said. “But they did create a situation where FTX could take dangerous risks with no repercussions.” If only the U.S. offered a more conducive environment for crypto.
  • Then there’s the wild and sinister conspiracy theory suggesting Gensler had secret dealings with now-disgraced Bankman-Fried. Minnesota Rep. Tom Emmer said in a tweet that his office is looking into allegations that the SEC chair was “helping SBF and FTX work on legal loopholes to obtain a regulatory monopoly.”
  • Jake Chervinsky, head of policy at the Blockchain Association, also said in a tweet, “Nobody hates crypto scammers more than us. Nobody who cares deeply about this technology, this industry, this community wants to see them abused by crooks. But current SEC leadership has proven incapable. I want to know why.”
  • In a tweet tagging Gensler, Ripple general counsel Stuart Alderoty also asked if the SEC chair was “acting alone when meeting with SBF? … Would SBF have ended up with even more consumer assets under his control?” No evidence has been presented to back up these allegations. The SEC did not immediately respond to requests for comment.

But doesn’t the FTX crash actually vindicate Gensler? That’s what other industry observers believe, as they push back on the SEC boss’s critics.

  • The SEC under Gensler actually minimized the harm the FTX meltdown had on U.S. consumers and investors, they argue.
  • John Reed Stark, a staunch crypto critic and founding chief of the SEC’s Office of Internet Enforcement, said Gensler “saved millions, perhaps even billions, in investor crypto-losses” by taking on the industry “despite mammoth political opposition and rogue defendants with infinite financial resources.”
  • Jonah Crane, a partner at Klaros Group, told Protocol, “the issues that took down FTX vindicate Gensler’s focus on conflicts of interest and the risks of a vertically integrated model that exists across the crypto sector.”
  • Circle CEO Jeremy Allaire said Congress’ failure to pass new laws for crypto is part of the problem. But so is the lack of clear guidance from the SEC. “We can't just say we have the rules, follow them,” he said. “What is it? That’s what a lot of people have been asking for. There has to be tailored rules.”

The SEC faces “a can’t-win situation,” Fagel said. “The same people who have fought hardest to keep crypto unregulated, and who made the decision to trade unregistered cryptocurrencies on a Caribbean-based exchange, are now screaming at the SEC for not protecting them. I’m not sure if that’s irony or schadenfreude.”

— Benjamin Pimentel (email | twitter)


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On the money

FTX may have more than 1 million creditors, the beleaguered crypto company disclosed in a bankruptcy filing. The FTX filing also said “questions arose” about CEO Sam Bankman-Fried’s “handling of FTX’s complex array of assets and businesses under his direction.”

California is suspending BlockFi’s license. The state’s Department of Financial Protection and Innovation announced the move after the crypto lender said it was pausing withdrawals due to the FTX collapse.

Plaid has suspended FTX access. The fintech infrastructure giant said over the weekend that the crypto exchange will no longer be able to retrieve financial information through Plaid.

Visa is also breaking up with FTX. The payments network said it was ending its credit card agreements with the crypto marketplace, describing the FTX situation as “unfortunate.”

Goldman Sachs sees “significant” inflation drop. The Wall Street giant said a projected easing of supply chain constraints and slower wage growth will likely lead to a decline in inflation.

Nubank records a big revenue jump. The Brazilian fintech said its third-quarter sales rose threefold following a surge in customer growth.


Berkshire Hathaway vice chairman Charlie Munger has not exactly been a fan of crypto, which he said has led to “a bad combination.” “You are seeing a lot of delusion. Partly fraud and partly delusion. … The country did not need a currency that was good for kidnappers.”

A not-so-wise man once said, “You either die a hero, or you live long enough to become the villain. Or [your] Twitter gets hacked, idk, one of those two.” That man was Sam Bankman-Fried, tweeting prophetically in September of 2020. It appears the fallen “crypto king” has suffered both fates, issuing an odd stream of tweets Sunday night after filing for bankruptcy just a few days prior. The thread started with the single word “What” followed by consecutive tweet replies that spelled out “h-a-p-p-e-n-e-d.” We want to ask SBF the same question.

And in case you didn’t know, crypto scams are such an issue not because of a lack of regulation, but because of a series of protests that happened in the United States over two years ago. At least, that’s according to Matt Stoller, who argued that “Crypto scams are what happens when you defund the police,” on Twitter Monday. Apparently, the SEC just doesn’t have “enough cops to enforce the law.” Someone get Gary Gensler his bulletproof vest.

Deal flow

African super app Yassir raised $150 million in series B funding. Bond led the round, with participation from DN Capital, Dorsal Capital, Quiet Capital, Stanford Alumni Ventures, and the Y Combinator Continuity Fund.

Travel booking app Hopper raised $96 million from Capital One. The follow-on investment will be put toward an extension to a partnership between the two companies, which gives users additional bonuses for travel-related spending as well as special features like price-drop detection.

Bill will acquire the financial planning software Finmark. Bill, formerly called, will gain Finmark’s planning and cash flow analytics tools for use by their SMB customers.

San Francisco financial care platform Brightside raised $33 million in series B funding. Obvious Ventures led the round, with participation from a16z, Trinity Ventures, Clocktower Technology Ventures, and Chestnut Street Ventures.

Singapore-based crypto liquidity provider Amber Group raised $200 million in a round led by Temasek. The company’s valuation, now at $3 billion, has tripled in just the last year.

British crypto infrastructure firm Ramp raised $70 million in series B funding. UAE sovereign wealth fund Mubadala Capital and Parisian firm Korelya Capital co-led the round.


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