Tornado Cash sanctions are just the tip of the iceberg? US House committee investigates Coinbase, FTX, Binance

A U.S. House of Representatives committee accused crypto companies of a “lack of action” in protecting retail investors, arguing that crypto-related fraud is a big problem.

On Tuesday, Raja Krishnamoorthi, chair of the House Oversight and Reform Committee’s Economic and Consumer Policy Subcommittee, sent a letter to the largest U.S. crypto exchange asking for “information and documentation” on how each company is “combatting cryptocurrency-related fraud.” . The committee is part of the U.S. House of Representatives, which, along with the U.S. Senate, forms Congress and can introduce and debate bills and other legislative measures, including laws regulating cryptocurrencies.

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Coinbase , FTX , Binance US, Kraken and KuCoin each received a four-page letter asking for all documents related to crypto fraud dating back to 2009 by Sept. 12, along with answers to related questions.

The letters were nearly identical, each arguing that “cryptocurrency has become a favorite payment method for scammers and their preferred bait for unsuspecting victims.”

Krishnamoorthi wrote: “Given the growing popularity of cryptocurrencies as a payment method and investment, I am concerned about the rapid growth in fraud and consumer abuse. I am also concerned about the apparent failure of cryptocurrency exchanges to take action to protect transactions conducted through their platforms. Consumers who trade are concerned.”

According to research by the Federal Trade Commission, more than $1 billion in cryptocurrency has been lost to fraud since the beginning of 2021.

Krishnamoorthi asked Coinbase: “What mechanisms does Coinbase have in place, such as insurance that covers fraud or other crimes, to ensure that individuals who are harmed while using your services are compensated?” He also asked the federal government for advice on how to help cryptocurrency exchanges fight Fraud and Scam Advice.

In a letter to FTX CEO and founder Sam Bankman-Fried , the committee noted, “While some exchanges review cryptocurrencies prior to listing, others allow digital assets to be traded with little or no listed under review.”

Binance.US was also investigated by the commission on Tuesday, in a class-action lawsuit accusing the company of misleading consumers about the security of investing in the U.S. dollar-pegged stablecoin UST and its sister token Luna. At their peak, Luna and UST had a combined market capitalization of nearly $60 billion. Now, they are basically worthless.


The House committee also sent similar letters to the U.S. Treasury Department, Commodity Futures Trading Commission, Federal Trade Commission and Securities and Exchange Commission ( SEC ).

In the letter, Krishnamoorei asked government agencies for regulatory and policy advice, as well as their opinion on whether cryptocurrencies should be defined as “commodities, securities, or both.”

While there may be uncertainty about the U.S. government’s stance on cryptocurrencies, these House committee letters suggest the federal government wants to gather evidence quickly and stop being a bystander in what some see as a largely unregulated industry.

It looks like more regulation is coming in the US – and the Tornado Cash sanctions are really just the tip of the iceberg.

On Aug. 8, the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) added Ethereum-based privacy app Tornado Cash to its list of restricted entities. This sanctions event is a landmark event in the history of decentralized blockchain finance, and even in the history of the Internet.


Given the rise in the number of criminals exploiting smart contract vulnerabilities, the U.S. Federal Bureau of Investigation (FBI) is encouraging investors in decentralized finance (DeFi) protocols to seek out code-audited platforms.

“Cybercriminals are increasingly exploiting vulnerabilities in smart contracts governing DeFi platforms to steal cryptocurrencies, resulting in losses for investors,” the FBI wrote in a public service announcement on Aug. 29 . The announcement details recommendations for investors and DeFi platforms.

DeFi has played a leading role in this year’s cryptocurrency theft. As of May 1, DeFi protocols were linked to 97% of cryptocurrency theft, according to Chainalysis.

The FBI has four key recommendations for investors in DeFi protocols. First, it encourages awareness and research of DeFi’s broad risks. It then recommends that people use platforms that have undergone one or more third-party code audits.

The FBI also advises people to “be wary of the onboarding of DeFi investment pools and the rapid deployment of smart contracts, especially in the absence of a recommended code audit.” It also highlights “crowdsourced solutions for vulnerability identification and patching” and open-source codebases possible risks. Law enforcement also recommends that DeFi protocols use “real-time analytics,” monitoring, and code testing to catch vulnerabilities and develop plans to notify platform users in the event of a security incident.

Additionally, newly released visitor logs show that FTX CEO Sam Bankman-Fried, FTX’s director of government relations and policy Eloria Katz, and former CFTC commissioner Mark Wetjen, who is now FTX’s policy director, visited the White House in mid-May to meet with White House policy adviser Charlotte Butash met with consultant Steve Ricchetti, and the log did not detail the content of the meeting.

Posted by:CoinYuppie,Reprinted with attribution to:
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