Sam Bankman-Fried, CEO of cryptocurrency change FTX, on the Bitcoin 2021 convention in Miami, Florida, on June 5, 2021.
Eva Marie Uzcategui | Bloomberg | Getty Images
Sam Bankman-Fried, co-founder of bankrupt crypto agency FTX, spent nearly a 12 months attempting to persuade regulators to let him introduce a derivatives product that might permit retail buyers to commerce with borrowed cash, in line with Rostin Behnam, chairman of the Commodity Futures Trading Commission.
In an interview with CNBC’s “Squawk Box” on Wednesday, Behnam stated Bankman-Fried had been lobbying the CFTC to amend the principles so FTX might let customers commerce derivatives utilizing margin slightly than paying upfront. He additionally needed to supply the contracts on to customers, with out having to undergo a futures fee service provider.
“It would have been a non-intermediated, margined model,” stated Behnam, who described the proposal as a “very tricky issue from a risk perspective.”
Prior to its chapter submitting final week, FTX had a registered derivatives platform with the CFTC referred to as FTX US Derivatives. The platform was a rebranding of LedgerX, an organization that FTX acquired in 2021.
FTX US Derivatives is among the few FTX-related properties that is not part of its chapter proceedings and stays operational in the present day. However, it seems to have returned to utilizing the LedgerX model. If you go to the FTX US Derivatives web site, it redirects you to ledgerx.com. And Zach Dexter, who was CEO of FTX US Derivatives, says on his LinkedIn profile that he is CEO at LedgerX. The platform lets merchants purchase choices, swaps and futures on bitcoin and ethereum.
Starting in Dec. 2021, Bankman-Fried and his senior management group made frequent visits to the CFTC to advocate for an modification to its present license, Behnam stated.
When requested what Behnam considered Bankman-Fried over the course of assembly with him for almost a 12 months, the chairman stated that the previous FTX chief “knows markets, at least he tries to suggest that” and he “wanted to really aggressively have this amendment passed.”
Bankman-Fried’s backers appealed to the CFTC on to again his plan, Behnam stated. They included Fidelity Investments, Fortress Investment Group, and even universities from throughout the nation.
FTX, which was valued at $32 billion by personal buyers earlier this 12 months, spiraled in spectacular vogue final week as reviews of liquidity issues resulted in prospects withdrawing billions of {dollars} a day from their accounts. However, FTX did not have the capital to honor these requests as a result of it had used buyer deposits for quite a lot of functions, together with for buying and selling at Bankman Fried’s hedge fund, Alameda Research. Bankman-Fried additionally disclosed on Twitter on Wednesday that FTX had constructed up round $13 billion of leverage.
Behnam stated his company’s staffers had been nonetheless within the means of reviewing FTX’s utility for an amended license when FTX and roughly 130 further affiliated corporations, together with Alameda and FTX’s U.S. subsidiary collectively filed for chapter safety.
Since then, LedgerX has reportedly withdrawn its utility for leveraged derivatives buying and selling.
Before the implosion, Bankman-Fried had been attempting to play the position of business savior because the crypto market sank and lenders and hedge funds went stomach up. In May, he additionally purchased a 7.6% stake in buying and selling app Robinhood, which on the time had misplaced greater than three-quarters of its worth since its IPO final 12 months. In April, FTX purchased a stake in equities change IEX.
“If you think about it, in retrospect, with his Robinhood acquisition and his relationship with IEX — it goes beyond crypto what FTX was trying to do,” Behnam stated.
WATCH: Authorities eyeing bringing Sam Bankman-Fried to the U.S. for questioning
Source: www.cnbc.com”