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Inquiry into ETH and FTX prompts Gensler to face questioning

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SEC Chairman Gary Gensler testified before the House Financial Services Committee as he was questioned by Representative Bill Posey about the crash of cryptocurrency exchange FTX in November 2022.

Gensler Dodge on FTX

Congressman Posey took up a conversation about how crypto firms blend different business functions and asked the SEC chairman if he was worried about how FTX would operate before it failed.

In response, the chairman of the US Securities and Exchange Commission said that there are concerns about functions such as stock exchange, broker-dealer and hedge fund combined.

In response, Congressman Posey asked, “Given these concerns, have you asked your staff to look into them?”

Remember, when FTX collapsed in November 2022, it reported that the SEC and Sam Bankman-Fried (SBF) were working on a deal to settle the situation. Some people have said that SBF’s mother may have called Gensler.

Gensler said in a congressional hearing that the SEC had taken some steps against SBF for breaking securities law.

When asked how he first noticed problems with FTX, he replied that he saw steps being taken against FTX in December 2022.

Given the scale of the market’s losses, the SEC has been accused of moving too slowly to take any action against FTX.

The committee chair, Patrick McHenry, also asked Gensler whether ETH is a security or a commodity. Growing uncertainty and strict enforcement of cryptographic regulations were the focus of this investigation.

In response to a question about whether he considers ETH a security or a commodity, Gensler deflected by saying that the “facts and circumstances” of specific crypto tokens and the Howey test should be considered.

The impact of FTX on investors

SEC Chairman Bill Posey questioned the timing of the alerts to the public and investors after the SEC’s meeting with FTX. Gensler stressed that for the sake of the ongoing SEC investigation, the details were classified.

For the credibility of the investigation and the privacy of those involved, we treat any information collected as strictly confidential.

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