US Lawmaker Accuse the SEC of Abusing its Powers
- The US House Oversight and Investigations Subcommittee began an inquiry into the SEC’s handling of the FTX investigation in February.
- The committee requested additional information on the charges made against Bankman-Fried in a letter addressed to SEC Chair Gary Gensler.
- Republicans in the committee accused the SEC of hindering its investigation of the case.
During a hearing on SEC oversight on Thursday June 22, the chairman of the US House Oversight and Investigations Subcommittee, Bill Huizenga of Michigan, criticized the Securities and Exchange Commission (SEC) for failing to provide the proper documentation regarding the arrest and prosecution of former crypto billionaire Sam Bankman-Fried. The 31-year-old was the prominent founder and CEO of the bankrupt crypto exchange FTX.
Rep. Huizenga criticized the SEC for how the agency handled the FTX investigation and for failing to provide sufficient documents on the case as previously requested. In February, the US House Oversight and Investigations Subcommittee asked the SEC to provide documents for the committee to better understand the charges against Bankman-Fried. However, Huizenga claimed that “100% of the documents” provided by the SEC were publicly available.
Huizenga also slammed the SEC for missing a deadline of February 24 to provide documents that purportedly posed “serious questions about the SEC’s process and cooperation with the Department of Justice” in relation to the Bankman-Fried case. He added that the documents provided by the SEC were simply public briefings on “how the SEC and the Justice Department worked together” in Bankman-Fried’s case.
Suprisingly, today’s hearing escalated into a partisan argument over whether the SEC ought to have responded to the committee’s request for the document faster.
Congressman John Rose questioned Megan Barbero, general counsel for the SEC, on why the SEC takes time to respond to requests. Recall that crypto exchange Coinbase recently made a similar accusation against the agency. Coinbase filed a court request to have the SEC respond to the petition it made last year on crypto policies. Some of the lawmakers accused the commission of deliberately avoiding providing clarity.
Representative Huizenga told Barbero that today’s hearing “could have and should have been avoided.” However, he said the committee had no choice since the SEC continued to be “uncooperative and unresponsive.”
Responding to Huizenga, Barbero argued that disclosing such documents to the committee was less difficult as they “do not require a commission vote”. However, she explained that the SEC must weigh Congress’s desire for information with the need to avoid jeopardizing an upcoming trial against Bankman-Fried, which is set to begin in October.
According to her,
The challenge here is balancing the concerns that the committee staff has identified as the priority of the commission’s action memo, which is the very document that contains the information that could prejudice our civil enforcement action and the parallel criminal investigation.
Thursday’s hearing shows the growing frustration of lawmakers about the SEC’s enforcement actions against crypto firms. Interestingly, Republicans appear to have grown tired of SEC Chair Gary Gensler’s time at the SEC.
Gensler’s leadership of the SEC has seen the agency take bold enforcement actions against several crypto companies, and Republicans believe Gensler’s action would hinder innovation.
Two Republican lawmakers recently proposed a bill that would restructure the SEC and fire Gensler from his role. However, it looks unlikely that such a bill will be passed.
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