CFTC Head Makes Revelations About Sam Bankman-Fried

The head of the Commodity Futures Trading Commission (CFTC), Rostin Behnam, had some revelations to make about the former CEO of the bankrupt crypto exchange FTX, Sam Bankman-Fried.

He said that the co-founder of FTX had been trying to convince regulators for a year to allow him to launch a derivatives product, which could be used by retail investors for trading with borrowed funds.

Revelations

On Wednesday, Behnam disclosed that the crypto entrepreneur had lobbied the body for a year to make amendments to the rule.

This was because he wanted users of the FTX exchange to use margin for trading derivatives, instead of having to pay upfront.

He also wanted to cut out the role of a futures commission merchant and offer contracts to the users directly.

The chairman of the CFTC stated that the model would have been margined and non-intermediated, which from a risk viewpoint is extremely tricky.

Before it filed for bankruptcy in the previous week, a derivatives platform called the FTX US Derivatives had been registered with the CFTC by FTX.

Last year, FTX acquired LedgerX and the platform registered was just a rebranding of the company.

LedgerX

It should be noted that the bankruptcy proceedings do not include the name of FTX US Derivatives because it is still operational, making it one of the handfuls of FTX-related properties to be excluded.

But, it appears that it has shed the FTX name and gone back to the LedgerX brand. Users are redirected to ledgerx.com when they try to visit the FTX US Derivatives website.

Likewise, the LinkedIn profile of the CEO, Zach Dexter, now states that he is the chief executive of LedgerX. Traders can use the platform for buying futures, swaps, and options on Ethereum and bitcoin.

More details

Behnam disclosed that Bankman-Fried and his team had begun visiting the CFTC in December 2021 in order to make their case for the aforementioned amendment.

The CFTC chairman admitted that SBF seemed to have an understanding of the markets and wanted to see the amendment passed.

He said that those supporting Bankman-Fried had also asked the CFTC to support his plan. These included Fortress Investment Group, Fidelity Investments and even some universities.

With a valuation of $32 billion, FTX unraveled rather spectacularly in the previous week, as customers withdrew billions from their accounts on the crypto exchange in a day, thereby resulting in a liquidity crisis.

Since FTX had used up customer deposits for various purposes, it could not honor the requests of its customers.

Moreover, SBF disclosed on Wednesday that the crypto exchange was leveraged to a value of $13 billion.

According to Behnam, they had been evaluating the proposal put forward by FTX for an amendment when it filed for bankruptcy.

Since then, he said that the application for offering leveraged derivatives trading had been withdrawn by LedgerX.

Behnam asserted that FTX was trying to move beyond the crypto space, as the acquisition of IEX, an equities exchange, and Robinhood, a trading app, indicated.

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