Ripple CEO Says SEC Chairman Was Caught Flat-Footed When FTX Fraud “Came to Light”

Brad Garlinghouse slams Gary Gensler over FTX collapse. 

Ripple’s CEO Brad Garlinghouse has slammed SEC chairman Gary Gensler for not investigating bankrupt cryptocurrency exchange FTX before the fall of the crypto trading firm. 

Garlinghouse made the comment in response to a Wall Street Journal (WSJ) article, which questioned Gensler’s whereabouts when FTX’s former CEO Sam Bankman-Fried (SBF) misappropriated users’ funds.  

“Gensler is trying to spin the FTX blow-up as a cautionary tale about the crypto “wild West.” But where was the SEC sheriff when Sam Bankman-Fried was funneling FTX customers’ funds to his Alameda Research trading house to finance risky bets and a lavish lifestyle?” WSJ editorial board member Allysia Finley quizzed. 

Garlinghouse Says SEC Was Caught Flat-Footed

Reacting to the article, Garlinghouse rated Finley’s question as 100% correct. In a tweet today, Garlinghouse said it is ridiculously shameful for Gensler to claim the SEC’s enforcement action is the “cop on the beat” for crypto, yet he was caught off-guard when the FTX fraud happened. 

“It’s ridiculous and frankly shameful that Chair Gensler was touting the SEC’s enforcement actions as the “cop on the beat,” yet (per public reports) MET with SBF multiple times but was caught completely flat-footed when the alleged fraud finally came to light,” Garlinghouse said. 

Gensler Says SEC Is Crypto Cop on the Beat

Gensler has always touted the SEC as the appropriate “cop on the beat for crypto” despite widespread criticisms from crypto stakeholders, including Ripple execs. Last year, industry players urged Gensler to obtain congressional authorization before the SEC can regulate crypto products. 

However, Gensler rejected these calls, claiming the SEC has robust authority permitting the agency to regulate crypto-related products. The SEC has taken stringent measures against crypto companies in recent times. In February, the SEC levied a $100M fine against crypto lending platform BlockFI for offering unregistered securities offering in the U.S. 

U.S. Lawmakers Question Gensler’s Involvement in FTX Saga

Questions have been raised about the SEC’s negligence over the collapse of FTX. Following the collapse of FTX, Minnesota Rep. Thomas Earl Emmer alleged that Gensler was working with SBF to give the crypto exchange special treatment from the SEC, referencing a meeting the duo had in March. 

“They were working with Sam Bankman-Fried and others to give them special treatment from the SEC that others aren’t getting […] We need to get to the bottom of this—we need to understand why Gary Gensler and the SEC were not doing their job,” Rep. Emmer said. 

It is worth noting that the SEC also joined the CFTC to charge SBF for mishandling investors’ funds. However, Rep. Warren Davidson was not convinced about the agency’s charges against the former FTX CEO. He noted that the SEC was responsible for SBF’s arrest, which took place hours before the scheduled December 13 congressional hearing. 

“The best theory I have is that the SEC and other regulators didn’t want SBF to give his version of ‘so what were you doing with Gary Gensler in the Securities and Exchange Commission with all these meetings and interactions you’ve had with regulators?,” Rep. Davidson added.