Was SEC Chair Gary Gensler Helping Sam Bankman-Fried Find Legal Loopholes for FTX?

Speculation is mounting in the community that Securities and Exchange Commission (SEC) chairman Gary Gensler could have worked with FTX co-founder Sam Bankman-Fried to find legal loopholes the exchange could take advantage of.

The speculation has emerged as ties between Sam Bankman-Fried, his parents Joseph Bankman and Barbara Fried, and prominent figures at the top level of government and regulatory agencies in the US, have been uncovered in recent days. And to top things off, Bankman-Fried himself is also a major political donor, first and foremost to the Democratic Party.

The rumor mill has in recent days become so intense that Republican Rep. Tom Emmer, known as one of the most crypto-friendly members of the House of Representatives, tweeted that he has received reports that Gary Gensler was helping Bankman-Fried “work on legal loopholes to obtain a regulatory monopoly.”

“We’re looking into this,” the crypto-friendly politician added.

A possible explanation for what reports Emmer was referring to is FTX’s acquisition of the US-based crypto lender BlockFi, which already had the necessary regulatory approvals in the US. By acquiring this company, Bankman-Fried may have thought that the regulatory approvals would also extend to FTX, giving the exchange a major advantage of its global rival Binance and others.

Ties to the Democratic Party

Notably, the tweet from Emmer came a day after an article in Fortune revealed that Bankman-Fried’s mother, Barbara Fried, is the leader of a group known as Mind the Gap that raises money from the tech industry for Democrats.

In a 2020 article in The Stanford Daily, Mind the Gap was described as a “secretive Stanford-connected Democratic fundraising group” that funneled more than $20m to Democratic candidates in the 2018 House of Representatives election.

Meanwhile, Bankman-Fried’s father, Stanford law professor Joseph Bankman, also has close ties to leading politicians. He has in the past drafted tax legislation for Senator Elizabeth Warren, a Democrat well-known for her opposition to crypto and crypto mining in particular.

SEC chair Gary Gensler also has ties to the Democratic Party, and previously served as the finance chair for Hillary Clinton’s presidential campaign.

“It’s not a stretch to imagine [Sam Bankman-Fried] sought to exploit these political ties to his benefit,” the Fortune article said, while also adding that now is “a good time for skeptics to ask why [Gensler] failed to stop FTX in the first place—and if anyone else in high places had a role in enabling this debacle.”

Lastly, and perhaps not surprisingly, speculation on the ties between Bankman-Fried and prominent government figures is also running rampant in the community.

Among those who have voiced their opinion is the popular crypto Twitter user Tara Bull, who asked if FTX was “used to launder money for the democratic party?”

“A question worth asking,” responded the new Twitter owner and well-known Dogecoin fan Elon Musk.