On Tuesday, Republican Congressman Patrick McHenry (NC-10) expressed his support for the arrest of former FTX CEO Sam Bankman-Fried.
McHenry is the top Republican on the House Financial Services Committee. Bankman-Fried was scheduled to testify in front of the panel, along with the crypto exchange company's current CEO, John Ray III. However, Bankman-Fried was arrested in the Bahamas late Monday.
Federal prosecutors allege he intentionally deceived customers and investors to enrich himself and others, while playing a central role in FTX's multibillion-dollar collapse. The indictment says that beginning in 2019, Bankman-Fried devised "a scheme and artifice to defraud" FTX's customers and investors, diverting their money to pay expenses and debts at his crypto hedge fund, Alameda Research, and to make lavish real estate purchases and large political donations.
Separately, the SEC filed civil charges against Bankman-Fried, alleging he defrauded investors and used proceeds to buy real estate for himself and his family.
"Frankly, I looked forward to getting his lies here on the record under oath," McHenry said in his opening remarks Tuesday. "Nevertheless, the arrest of Sam Bankman-Fried is welcome news. But it still does not get at the bottom of what happened at FTX and why it happened, and who else may be responsible."
McHenry will become the committee's chairman when Republicans take control of the House in January. He used his opening comments to preview hearings under his leadership, including the "early and often" questioning of Gary Gensler, chairman of the Securities and Exchange Commission.
McHenry faulted Gensler for "regulation by enforcement" for cryptocurrencies and exchanges.
"And we'll hear from him and how we can provide clarity on the application of our securities laws to trading platforms, which he has failed to do," McHenry said.
In an interview with Yahoo Finance, Gensler said crypto companies should comply with existing laws.
"They can do that appropriately, working with the SEC, or we can continue on a course with more enforcement actions, and I would have to say that the runway's getting shorter," he said.
McHenry said new laws are needed to ensure other cryptocurrency exchanges do not collapse.
"The Financial Services Committee has an important role to play in this factfinding mission, which we will start today and continue as we work towards a legislative outcome to prevent this from happening again," he said.
The Associated Press contributed to this report.
