Sen. Elizabeth Warren (D-MA) and celebrity investor Kevin O’Leary clashed during a Wednesday hearing of the Senate Banking Committee discussing new federal regulations on cryptocurrency following the collapse of digital asset exchange FTX.
The company filed for bankruptcy last month after users learned that the venture’s assets were commingled with sister firm Alameda Research; both were controlled by Sam Bankman-Fried, who was arrested this week in his luxury apartment in the Bahamas and charged by American officials with various types of fraud.
Warren, a longtime skeptic of the nascent cryptocurrency industry, remarked that criminals and state sponsors of terror use the tokens for money laundering. She asked O’Leary whether “the potential benefits of crypto are so promising that we should accept weaker anti-money laundering rules and weaker compliance from crypto firms than we require from banks,” causing the “Shark Tank” personality to balk.
“No, I think we should apply the same regulatory structure that we apply to existing trading of stocks and bonds. An exchange is tied to broker-dealers,” he replied. “That is not complicated; it’s already been implemented in other countries. And so and I take issue, senator, with your concept that it makes it easier to do money laundering. Currencies have been used for drug trafficking schemes since the sixties and the American dollar when it was thrown out of a Piper aircraft in a duffel bag. The American dollar is also used by bad actors all the time.”
Warren stressed that she believes “the same rules against money laundering” should apply to “crypto in the way that they apply to banks, to stockbrokers, to credit card companies.” O’Leary responded that investors can solve the problem of money laundering “overnight” if they know “client rules on both sides of the transaction and use a crypto such as USDC that is regulated.”
O’Leary was paid more than $15 million in equity and digital assets to serve as a celebrity brand ambassador for FTX; the entrepreneur lamented during a recent interview that he succumbed to “groupthink.” He testified before members of the Senate that he expects to lose the entire compensation package, even though he believes the industry has upside potential.
“The collapse of FTX is nothing new. While this situation is painful for shareholders, employees, and account holders, in the long run, it does not change this industry’s promise,” asserted the entrepreneur, who still has investments in other cryptocurrency companies. “Enron came and went and had no impact on the energy markets. Bear Stearns and Lehman Brothers’ demise had no impact on the long-term potential of American debt and equity markets.”
O’Leary is one of several celebrities who were hired by Bankman-Fried in a marketing blitz that occurred as the company became increasingly strapped for cash. The would-be cryptocurrency wunderkind solicited multiple cultural icons, including Tampa Bay Buccaneers quarterback Tom Brady and his supermodel ex-wife Gisele Bündchen, to work as brand ambassadors; many of the influencers are now defendants in a lawsuit asserting that they participated in a “fraudulent scheme” designed to fool unsophisticated investors.
A complaint from the Securities and Exchange Commission against Bankman-Fried alleges that he used commingled funds for “undisclosed venture investments, lavish real estate purchases, and large political donations.” The disgraced startup founder, who has been denied bail due to the flight risk he poses, could spend more than a century in prison if convicted on all counts.