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Caitlin Long, CEO of crypto bank Custodia, criticized the US government for its handling of a massive crypto fraud that occurred months before the company’s collapse. She spoke out in a blog post after revealing evidence to police. Long’s post followed Custodia’s unsuccessful application to join the Federal Reserve System, which was denied by the Federal Reserve Board.
Leaders of digital currency and blockchain companies are unhappy with the US government’s crackdowns and lack of regulatory clarity. Brian Armstrong, CEO of Coinbase, has called on Congress to pass clear cryptocurrency legislation, and Jesse Powell, CEO of Kraken, has echoed that message. On the 17th of February Caitlin LongCEO of Custodia, published a blog post explaining that she had provided evidence to the authorities about a crypto-fraud case months before the company collapsed, leaving her millions of customers with losses.
In her blog post titled “Shame on Washington, DC for firing a messenger who warned against the crypto debacle,” Long argues that the current enforcement actions are a misguided attack on the entire industry. “Calls for action today are coming from many of the same politicians who were charmed by the scammers,” Long wrote. It is well known that senior members of the US Securities and Exchange Commission (SEC), the White House and the Commodity Futures Trading Commission (CFTC) met with Sam Bankman-Fried (SBF) and senior FTX officials.
In addition, an estimated one in three members of Congress received a direct contribution from SBF and his inner circle. “In a 180-degree turn, [policymakers are] now throwing the baby out with the bathwater,” Long wrote in his blog post. The Custodia boss also mentioned that government officials compared her crypto bank’s operations to FTX’s fraud and collapse, resulting in an ambush against the crypto industry by officials.
“Custodia Bank recently found itself in the crosshairs of Beltway Politics at its worst,” Long emphasized. “Custodia was simultaneously attacked by the White House, the Federal Reserve Board of Governors, the Kansas City Fed and Senator Dick Durbin (who confused our unleveraged, 100 percent liquid and solvent bank with FTX in a Senate speech, in which he attacked two companies run by female CEOs – Fidelity and Custodia – and implicitly compared us to a 29-year-old accused fraudster who now wears an ankle bracelet.”
The Custodia boss added:
Custodia tried to be federally regulated — the very result bipartisan policymakers claim to have. Nevertheless, Custodia has been denied and [is] now belittled for daring to come through the front door.
After Long published his blog post about the situation, Kraken CEO Jesse Powell said, answered to her Twitter thread on the subject. “I can’t tell you how annoying it is to have pointed out massive red flags and obvious illegal activity to regulators only to have them ignore the issues for years,” Powell tweeted. “‘They are offshore. It’s complicated. We look at everyone. THIS YEAR. To then be used as their example.”
The complaints by Long, Armstrong and Powell follow the SEC’s enforcement action against Terraform Labs and CEO Do Kwon, nine months after the entire Terra ecosystem collapsed. The US securities regulator was criticized for arriving late to the gameand many believe that the SEC is simply throwing spaghetti at the wall to see what will stick.
What are your thoughts on the criticism of Custodia’s CEO regarding the US government’s handling of the recent enforcement actions in the crypto industry and the red flags she pointed out before a crypto company’s collapse? Share your thoughts on this topic in the comments section below.
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