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Lawmakers tried to deal with the dramatic fall of cryptocurrency exchange FTX on Wednesday, a day after federal prosecutors detailed allegations of brutal financial crimes by former CEO Sam Bankman-Fried, who was arrested by authorities in the Bahamas.

Bankman-Fried, often referred to as “SBF,” was arrested Monday at a luxury compound in Nassau at the request of the U.S. government, and has been charged with multiple counts of conspiracy, wire fraud, money laundering and campaign finance violations.

The Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission allege Banman-Fried, 30, used consumer deposits on the FTX platform to make money through his Alameda Research hedge fund.

Members of the Senate Banking Committee considered proposals to regulate crypto markets during a hearing on Wednesday, including implementing stricter conditions such as gambling, classifying crypto assets as collateral and allowing federal agencies to extend existing rules for banks and brokerages to crypto markets.

Senate Banking Committee Chairman Sherrod Brown (D-Ohio) accused crypto of making it “easy, way too easy” for corruption and hacked celebrity backers to lure investors with flashy Super Bowl commercials and online ads.

Senator Patrick J. Toomey (Pa.), the top Republican on the Senate Banking Committee and the main crypto booster in Congress, called for a more calm response to the FTX crisis and warned to punish the crypto industry for the problem of an exchange.

He compared the FTX meltdown to the 2008 subprime mortgage crisis. “Have we decided to foreclose on the mortgage?” asked Toomey, who will leave the Senate in two weeks if he does not seek re-election. “not at all.”

He pointed out that cryptocurrencies prevent inflation and allow private financial transactions.

“Let’s remember the fall between man and the device,” Toomey said. “In this case, the tool is software, and the code has committed no crime.”

Before the crash, FTX was the third largest crypto exchange in the world by volume. The firm’s tailgating began last month, when the CEO of rival crypto exchange Binance, Changpeng Zhao, announced the sale of $530 million worth of crypto tokens issued by FTX. Bankman-Fried relied on the country’s tokens to protect the companies’ high debt.

The move sparked panic, with FTX clients scrambling to get $5 billion in deposits off the platform. In a last-minute bid to meet his needs, Bankman-Fried turned to Zhao for help, and the CEO of Binance agreed to buy FTX. But Zhao revised it the next day, saying his review of FTX’s books showed “incorrect client funds.” Two days later, Bankman-Fried stepped down and said the company was filing for bankruptcy.

Kevin O’Leary, the entrepreneur and “Shark Tank” television personality who was paid $15 million to promote FTX, told the Senate panel that “one will deliberately put the other out of business.”

FTX customers are pursuing a class-action lawsuit against O’Leary and 10 other famous FTX endorsers — including Tom Brady, Gisele Bundchen, Larry David and Naomi Osaka — who argue that such personalities are responsible for luring consumers into bad deals.

A spokesman for O’Leary did not respond to a request for comment on the lawsuit. Representatives for the other 10 defendants either did not respond to requests for comment or declined to comment.

Other witnesses include Hilary Allen, professor of banking and securities regulation at American University; Jennifer Schulpe, who studies financial markets at the conservative Cato Institute; and Ben McKenzie Schenkkan, actor and television star of “The O.C.” And they’re hitting “Gotham.” McKenzie Schenkkan has become one of the crypto industry’s unlikely but most prominent critics, a bubble full of detractors. He coWriting a book on the industry to be published this summer.

When Brown asked witnesses if FTX-like “reckless, unethical or worse” behavior was found in other crypto firms, McKenzie Schenck replied, “It’s horrible.”

According to Brown, “FTX and Alameda Research have taken advantage of the crypto industry’s need for speculation.”

The hearing comes as Brown indicated his interest in working with top financial regulators to create a federal rulebook for the crypto industry. Other members of the panel have their own ideas, and Sen. Elizabeth Warren (D-Mass.) — backed by Sen. Roger Marshall (R-Kan.) — is adding a bill intended to crack down on the national. Security risks posed by cryptocurrency. The measure seeks to more strictly enforce the anti-money laundering requirements already imposed on crypto businesses by traditional financial institutions.

“No matter how many TV commercials you make or how many political contributions you make, crypto doesn’t get a pass to help the worst criminals in the world,” Warren said at the hearing.

If convicted, Banman-Fried faces up to 115 years in prison on charges brought by regulators and prosecutors. He appeared in a Bahamian court on Tuesday to fight a US extradition request. A judge ordered him held without bail after local prosecutors argued that he was a flight risk and that money could be stashed in other countries.

Bankuman-Fried’s attorneys countered that their client suffered from depression and had dietary restrictions that could not be met in prison. In addition, Bankman-Fried promised to appear in future proceedings.

Wednesday’s Senate proceedings came a day after the House Financial Services Committee held a hearing involving FTX’s new CEO, John J. Ray III, who came in to clean up the company’s finances. Ray He called Bankman-Fried’s actions “extortionate.” Ray said it would take “months, not weeks” to recover lost consumer deposits, adding, “We can’t recover all the losses here.”

U.S. officials called Bankman-Fried’s actions “one of the largest financial frauds in American history” at a news conference Tuesday, and hinted at the possibility of additional charges against other FTX officials and Bankman-Fried associates.

The Justice Department’s indictment, filed in the Southern District of New York, alleges “known and unknown” co-conspirators. The SEC’s complaint details at least $2 billion in real estate purchases and loans to Bankman-Fried, his parents and FTX executives.

“The facts of the loan and acquisition, as well as the poor documentation of significant company debt and expenses, were not disclosed to investors,” the complaint states.

Before FTX’s collapse, Bankman-Fried influenced politics and pop culture. In the year He was the second largest Democratic donor in the 2022 midterm elections, establishing himself as the top proxy for the crypto industry in Washington. His blond hair and his commitment to charity – an approach known as effective altruism – have made him popular with an online following.

But FTX followed major marketing tactics to boost consumer confidence in the industry. He bought advertising space on the uniforms of Major League Baseball umpires. The National Basketball Association’s Miami Heat said it would terminate its $135 million arena naming rights deal with FTX due to the company’s failure. In the year The agreement, signed in 2021, was meant to last for 19 years.

Since the FTX collapse, politicians have struggled with how to distance themselves from Bankman-Fried. In the two years leading up to the November midterm elections, the crypto executive donated $40 million to federal candidates and campaign groups, according to federal records. Most of the money went to Democrats, although Banman-Fried mentioned additional undisclosed contributions to Republicans.

In the year The two biggest beneficiaries of Bankman-Fried in 2022 are House Majority PAC and Senate Majority PAC, which help elect Democrats to their respective chambers. Those organizations alone received about $7 million from him in the past two years, federal records show.

Damian Williams, the U.S. attorney for the Southern District of New York, called Bankuman-Fried’s donations “dirty money” used to influence policy decisions.

Two key lawmakers, Sens. Debbie Stabenow (D-Mich.) and John Boozman (R-Ark.), confirmed Tuesday that their offices will donate the money they received from Bankman-Fried to charity. The two worked hand-in-hand with the now-disgraced crypto mogul on legislation seen as friendly to the industry.

Even before his arrest, some lawmakers began trying to separate him from the man who was once in better favor.

Rep. Hakeem Jeffries (DNI), who is set to become House Minority Leader in the next Congress, made a donation to the American Diabetes Association weeks ago, an aide said. Sen. Joe Manchin III (DW.Va.) made a donation to a local food bank before Thanksgiving, his office said. And Sen. Kirsten Gillibrand (DN.Y.), a longtime crypto advocate, made her donation this month to a nonprofit that fights poverty, a spokeswoman said.

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