Coinbase, FTX, Binance Receive Questions From Congress About Crypto Scams

In its first foray into crypto, the House Oversight and Reform Committee is putting pressure on federal agencies and cryptocurrency exchanges to protect Americans from scammers. .

In a series of letters sent Tuesday morning, the committee asked four agencies, including Ministry of Treasury, Federal Trade Commission, Commodity Futures Trading Commissionand Securities and Markets Commissionas well as five digital asset exchanges – Coinbase, FTX, Binance.US, Krakenand KuCoin – for information and documentation on what they are doing, if any, to protect consumers from scams and against crypto-related fraud.

More than $1 billion in cryptocurrencies have been lost to fraud since early 2021, According to research from the FTC.

“As stories of skyrocketing prices and overnight wealth drew both professional and amateur investors to crypto, the scammers made money,” said Congressman Raja Krishnamoorthi. , D.-Ill., Chairman of the Subcommittee on Economic and Consumer Policy, writes. “The lack of a central authority to flag suspicious transactions in many situations, irreversible transactions, and the limited understanding of many consumers and investors about the underlying technology make cryptocurrencies become the preferred method of transaction for scammers.”

The letters require federal agencies and cryptocurrency exchanges to respond by September 12 with information on what they are doing to protect consumers. The committee says that these responses can be used to create legislative solutions.

In particular, the letters requesting the exchanges to provide documents dating from January 1, 2009, demonstrate efforts to combat cryptocurrency scams and scams, as well as showing efforts to was done to “identify, investigate, and remove or flag potentially fraudulent digital assets or accounts”, as well as highlight the discussion surrounding” whether policies should be applied. stricter or not”.

In a letter to Sam Bankman-Fried, CEO and Founder of FTX, the committee noted that “while some exchanges review cryptocurrencies prior to listing, others allow digital assets listed without or without inspection.”

Blockchain analytics firm Chainalysis has found that 37% of revenue from crypto scams in the last year has come to a “trailer carpet,” a type of scheme that involves developers listing tokens on a cryptocurrency exchange. an exchange, pump it up and then disappear with the money.

Binance. token sister, luna. At their peak, luna and UST have a total market value of nearly $60 billion. Now, they basically worthless.

Concerns about the safety of crypto funds used on centralized platforms are also gaining traction following the recent demise of Voyager Digital and Celsius, both popular apps among crypto investors. Double-digit annual percentage-profit retail deals each offered by the two companies. The subsequent bankruptcies of these two platforms have highlighted the question of who owns crypto assets when a custodial business goes up. In both Voyager and Celsius’ bankruptcy proceedings, customers are treated as unsecured creditors, rather than federally insured bank depositors, meaning there is no guarantee they will get their money back. get any of your money.

As for the relationship between an investor and a cryptocurrency exchange, the terms and conditions are different. In one submit financial documents released in May, Coinbase said its users would be treated as “generally unsecured creditors” in the event of bankruptcy.

Krishnamoorthi also noted that the agencies appear to operate with cross-purposes and provide inconsistent guidance to private sector players. “Without clear definitions and guidelines, agencies will continue to infighting and will not be able to effectively implement consumer and investor protections related to cryptocurrencies and exchanges on which they are traded.”

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