Democratic Party wants to toughen legislation on cryptocurrencies after mega-doner FTX goes bankrupt

The FTX bankruptcy has put cryptocurrencies in the eye of the storm once again. This is the case of the company led by Sam Bankman-Fried. The causes of the bankruptcy are under scrutiny as well as his status as the second largest donor to the Democratic Party, only behind George Soros. In the wake of the bankruptcy, both the White House and Democratic representatives have called for greater legislative control over these types of companies. Bankman-Fried is currently under investigation by the U.S. Department of Justice and the U.S. Securities and Exchange Commission.

After the bankruptcy was discovered on Election Day, Bankman-Fried resigned the following Friday, after FTX filed for Section 11 bankruptcy protection as a result of a "multi-million dollar" liquidity crisis. The value of the U.S. branch went from $8 billion to $1 billion, reports Newswars. Bankman-Fried has also had 94% of his personal fortune evaporate, in what Bloomberg called the biggest one-day collapse it had ever seen among billionaires. He currently has less than $1 billion left, and the number keeps going down.

Bankman-Fried lost 94% of its fortune in one day

In addition to being known for his work at FTX, Bankman-Fries donated $39.8 million to the Democratic Party, making him the party's second largest mega-donor, behind George Soros' $128 million. In addition, the former CEO contributed another $10 million to Joe Biden's 2020 presidential campaign, according to Fortune. His aggressive donations surprised traditional donors such as Michael Bloomberg (28.3 million).

Damage from the FTX crash has not been limited to the owner and those affected by the company. The cryptocurrency market as a whole plummeted due to concern about the company's solvency and fears of the contagion effect. The value of digital currencies has gone from $3 trillion to less than $2 trillion throughout, what experts call, the cryptowinter.

Cryptocurrency market drops by more than $1 trillion

On his YouTube channel, analyst Nobody Special Finances accused FTX of using a"Ponzi scheme" that ended up collapsing a week ago. "The truth is, Sam Bankman-Fried is a liar and a crook. His personal crypto, FTX Token, was basically a Ponzi scheme … He used his Ponzi token as collateral to borrow billions of real dollars that he couldn’t pay back … He then used those real dollars to build an empire out of dying companies. People thought they were buying bitcoin or something, but in reality, they were buying IOU."

White House to monitor developments

In the wake of the FTX crash, the Biden Administration has called for tougher legislation on cryptocurrencies. House Press Secretary Karine Jean-Pierre stated at a press conference that "prudent regulation of cryptocurrencies is really necessary." She further stressed that the Biden Administration and government agencies will monitor developments because, "cryptocurrencies affect everyday Americans."

Cryptocurrencies, "smoke and mirrors"

In addition, Democratic Senator Elizabeth Warren took a hard stance against cryptocurrencies, which she called "smoke and mirrors" and demanded "stronger" rules to protect "ordinary people."