How did we not see this coming? That’s the question many people are asking as the hyper-rapid, and potentially rabid, collapse of crypto trading platform FTX triggers a worldwide regulatory investigation.
Others may be taking their line of questioning a step further and asking: What could have been done to prevent this?
Calls for crypto regulations have grown louder following the collapse of the cryptocurrency exchange, which filed for bankruptcy on Nov. 11. The U.S. House Financial Services Committee is moving quickly to undertake a bipartisan hearing next month to investigate the cryptocurrency exchange’s collapse, the findings of which will likely have legislative repercussions for the entire industry.
In a recent court filing, the company’s new CEO John J. Ray III said FTX demonstrated “a complete failure of corporate controls,” which was helped along by “faulty regulatory oversight abroad.” Leaders in the public sector, including the former head of the Federal Deposit Insurance Corporation (FDIC), have joined the “regulation now” chorus in the wake of FTX’s failure.
PYMNTS recently sat down with Saule T. Omarova, a professor of law at Cornell University, where she specializes in the regulation of financial institutions, banking law, international finance and corporate finance, to talk about the recent developments with FTX, and their implications for the broader financial and regulatory system. Omarova was President Joe Biden’s nominee for U.S. Comptroller of the Currency, before requesting that her own nomination be withdrawn.
“We should have seen something like this coming because of the incredible speed with which this market has grown and the lack of any legal or regulatory compliance culture in this new sector, run by a lot of interesting [sic] personalities who are not necessarily part of the financial establishment,” Omarova told PYMNTS’ Karen Webster. One of the most immediate and important failures in the whole FTX saga was the lack of “common sense internal controls.”