FTX founder Sam Bankman-Fried met US CFTC head 10 times to clear application

There were also follow-up calls and exchange of messages, Commodity Futures Trading Commission chairman Rostin Behnam tells US Senate committee

Commodity Futures Trading Commission chairman Rostin Behnam prepares to speak before a US Senate committee to discuss the collapse of the cryptocurrency exchange company FTX. Bloomberg
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The founder and chief executive of failed cryptocurrency exchange FTX Sam Bankman-Fried met Commodity Futures Trading Commission chairman Rostin Behnam and other high-level agency officials 10 times over the past 14 months.

There were also follow-up calls and an exchange of messages, Mr Behnam told the US Senate Committee on Agriculture, Nutrition and Forestry.

Before the Senate hearing, the Washington-headquartered CFTC had declined to disclose how many times Mr Behnam had met Mr Bankman-Fried.

Mr Behnam said the meetings were focused on FTX’s efforts to amend and approve the clearinghouse licence for its derivatives exchange, LedgerX.

The petition for amendment, which was filed about a year ago, aimed to let LedgerX settle margined trades without the involvement of intermediaries.

The proposal was still awaiting approval when FTX filed for bankruptcy earlier this month.

Sam Bankman-Fried cofounded FTX in 2019. Bloomberg

“My team and I met with Mr Bankman-Fried and his team. Over the past 14 months, we met 10 times in the CFTC office at their request, all in relation to this … clearinghouse application,” Mr Behnam said.

FTX purchased LedgerX last year and it is overseen by the CFTC.

Since 2017, LedgerX has been registered with the CFTC as a designated contract market, swap execution facility and derivatives clearing organisation.

“LedgerX is one of the few FTX entities to not file for bankruptcy,” Mr Behnam said.

“The CFTC has been in near daily contact with LedgerX as well as the third-party custodians it uses to hold cash and digital assets.

“Based on the information presented to us at this time, LedgerX customer property remains secure and LedgerX has the financial resources to continue operating for the foreseeable future.”

The CFTC said its regulations require that LedgerX be completely walled off from the other unregulated FTX entities to protect customer property.

As part of the ongoing bankruptcy proceedings, FTX has reported that LedgerX holds more cash than all the other FTX debtor entities combined.

FTX filed for bankruptcy protection in the US on November 11 in the highest-profile cryptocurrency exchange failure to date, after traders pulled $6 billion from the platform over the course of three days and rival exchange Binance abandoned a rescue deal, Reuters reported.

FTX filed for bankruptcy protection in the US on November 11. AP

Mr Bankman-Fried, who cofounded FTX with Gary Wang and Nishad Singh in 2019, also resigned as chief executive after discussions with his father, Joseph Bankman of Stanford Law School, and his lawyers, the company’s 30-page bankruptcy filing showed.

Mr Behnam said the CFTC lacked the direct authority to write rules and oversee this marketplace and it may only reach it when fraud or manipulation has already occurred.

Founded in 1975, the mission of the CFTC is to promote the integrity, resilience and vibrancy of the US derivatives markets through sound regulation, it said on its website.

Updated: December 02, 2022, 5:11 PM