Republican Pat Toomey, who is retiring from his Pennsylvania Senate seat at the end of the term, said on Tuesday that FTX’s collapse wasn’t caused by the type of assets the firm held, but how the company used them, suggesting that the crypto exchange’s failure isn’t an indictment of digital assets.
“If you look at what happened with FTX, what at least appears to have happened by [reading] very extensive coverage, this is fundamentally not about the kind of assets that were held by FTX, it’s about what individuals did with those assets,” Toomey told the Senate Banking Committee during a hearing Tuesday.
Before it filed for bankruptcy last week, FTX was the world’s third-largest crypto exchange by trading volume. It reportedly lent billions of dollars, including funds that customers kept on the exchange for trading, to its affiliated trading firm Alameda Research, according to several media reports.
Toomey drew a comparison between FTX and derivatives brokerage firm MF Global, which went bankrupt in 2011 after executives misused customer funds.
Last year, Toomey drew fire after he disclosed investments in bitcoin and ethereum funds after pushing for less stringent crypto regulations. He also criticized federal regulators this summer for potentially going too far in discouraging banks from working with crypto companies.
In the Tuesday hearing, senator Bill Hagerty of Tennessee saying that if only bank regulators had passed better crypto regulation, FTX wouldn’t have been forced to be in the Bahamas, and that client money would have been protected.
Michael Hsu, the acting Comptroller of the Currency, pushed back, saying some basic foundational elements of cryptocurrency technology and the industry still aren’t settled, including fundamental things like ownership. “A market where property rights are unclear is a market built on sand,” Hsu said.
Greg Robb also contributed to this article.