Elizabeth Warren: Crypto giants are ‘collapsing under the weight of their own fraud’

New York (CNN) Senator Elizabeth Warren, a longtime crypto critic, recently warned turbulence in the digital asset space will only continue unless a series of regulators strengthen protections for investors.

“For all their talk of innovation and financial inclusion, the giants of the crypto industry – from FTX to Celsius to Voyager – are collapsing under the weight of their own fraud, deception and gross mismanagement,” she said.

“And when they go down, they take a lot of honest investors with them,” Warren (D-Mass.) added during his remarks Wednesday at an event hosted by the American Economic Liberties Project and Americans for Financial Reform.

FTX, Celsius and Voyager all filed for bankruptcy last year as asset prices fell and the global market cap of crypto collapsed by roughly $2 trillion. Federal prosecutors have charged several former FTX executives, including founder Sam Bankman-Fried, with orchestrating one of the largest financial frauds in US history.

The collapse of FTX in November triggered a contagion that continues to ripple through the crypto markets, which remain largely unregulated and opaque.

Warren on Wednesday asked regulators, including the Securities and Exchange Commission and banking regulators, to double the tools they already have. They must protect consumers, educate investors and pursue “meaningful consequences” for bad actors, she said.

“Crypto fraud is a huge problem, but it’s one we can fix,” Warren said.

The SEC over the past two years has made “a good start” by keeping crypto volatility out of the traditional banking system and preventing Bitcoin exchange-traded funds from hitting the market, she said. And without naming Bankman-Fried directly, Warren praised the SEC for accusing “crypto crooks” of defrauding ordinary investors.

But the SEC can’t fix everything.

“All of our regulators need to get on the game,” Warren said, urging environmental and banking officials to step up.

“Cryptomining companies are polluting communities, they’re taxing the power grid, and they’re driving up the cost of utilities in communities from Texas to New York,” she said. “Both the Department of Energy and the Environmental Protection Agency have the authority to require crypto miners to disclose their energy use and their environmental impact.”

Warren said the rise of crypto-friendly banks has already opened up the traditional banking system to greater risk, “raising the specter of a crypto collapse in which American taxpayers are left with the bag.”

“It is the banking regulators’ job to insulate the banking system – and taxpayers – from the risk of crypto fraud. They have the tools, and they must use them.

Ultimately, Warren said, wherever regulators lack the authority they need, it’s Congress’s responsibility to give agencies the tools they need to enforce the rules.

In her trademark no-nonsense tone, she acknowledged the crypto advocates who have long bristled at the idea of ​​greater regulation.

Tougher regulators, she said, would give the industry a chance “to prove whether it can deliver on its promises of innovation without robbing investors or laundering funds for drug traffickers and terrorists.”

“No financial industry should be allowed to write its own playbook – you either comply with the law or face harsh consequences for breaking it. Crypto is no different.”