Last Updated: 20 February 2023
The CEOs of Kraken and Custodia Bank say US regulators have ignored their warnings about scams and fraud. They are Jesse Powell and Caitlin Long, respectively, who claim to have always been in dialogue with the government about possible fraud in their sector.
1/ IT'S TIME FOR ME TO REVEAL A FEW THINGS. I've just published a post "Shame On Washington, DC For Shooting A Messenger Who Warned Of #Crypto Debacle." Link to post is here:https://t.co/yTWWrEk3Os pic.twitter.com/rbo21DzOv3
— Caitlin Long 🔑⚡️🟠 (@CaitlinLong_) February 17, 2023
In a Twitter thread, Long says, months before an unnamed company collapsed she raised the alarm about the crypto fraud committed there.
Long before millions of dollars were lost from their customers. She says: “I handed over evidence to the police where crimes were committed by a fraudulent crypto company, months before this company imploded and saddled its millions of customers with losses.
She says she also warned banking regulators of imminent risks of bank runs at banks serving the crypto industry even before actual bank runs have taken place. But according to Long, her warnings have gone nowhere because of “red tape”.
Jesse Powell, co-founder and CEO of crypto exchange Kraken, recently settled with the Securities and Exchange Commission (SEC), and he shares a similar experience. Powell says he finds it “irritating” that regulators ignored the “huge red flags and clearly illegal activity” he has pointed out for years.
I can't tell you how infuriating it is to have pointed out massive red flags and obviously illegal activity to regulators only to have them ignore the issues for years. "They're offshore. It's complicated. We're looking at everybody." FOR YEARS. Then to be used as their example. https://t.co/YHdNazM2UE
— Jesse Powell (@jespow) February 18, 2023
Powell and Long find it intolerable that their firms are being used as examples of fraud when they have been trying to do the right thing all along.
Long said her bitcoin bank Custodia has come under fire on several fronts as the White House attacked the Federal Reserve Board of Governors, the Kansas City Fed and Senator Dick Durbin. Last month, the Federal Reserve Board rejected Custodia Bank’s application to join the Federal Reserve System.
In a speech to the Senate, Long claimed that Senator Durbin “implicitly” compared her and Fidelity CEO Abigail Johnson to FTX founder Sam Bankman-Fried. Fidelity shook up regulators last year when it announced that customers could invest a portion of their retirement investments in bitcoin.
In other words: Long is doing her best to get federal approval, but she is running into the wall from the established powers.
According to Long, America needs to come up with some clear rules to flush out crypto pulp without bullying well-intentioned companies away from doing business.
Over the past week, the SEC in particular has stepped up the pressure on the sector. According to Long, ‘regulation by enforcement’ does not solve much.
‘Washington’s ill-considered action only pushes the real risks into the shadows, leaving regulators playing a game with a mole, as the risks constantly pop up in unexpected places.’ Regulators also need to listen much more and better to knowledgeable industry people like them.