Senators Elizabeth Warren and Sheldon Whitehouse have demanded an investigation into FTX’s failure.

Warren, Whitehouse Demand DOJ Action

FTX could soon face further investigations.

In a letter published today, Senators Warren (D-MA) and Whitehouse (D-RI) asked the U.S. Department of Justice (DOJ) to “hold [FTX’s] executives accountable to the fullest extent of the law.”

The senators noted that the once-leading crypto exchange, along with at least 130 affiliated companies, filed for bankruptcy this month. They also observed that FTX’s collapse had had a ripple effect in the financial industry, noting that lending firms and hedge funds such as Genesis Capital and Galois Capital had millions of dollars locked on FTX, while crypto lender BlockFi had suspended withdrawals in response to the exchange’s implosion.

The senators urged the DOJ to focus its investigation on how FTX harmed its customers. Warren and Whitehouse claimed that FTX had deceived customers through advertisement and celebrity endorsements and that former FTX CEO Sam-Bankman Fried had downplayed liquidity concerns when users realized they could no longer withdraw their funds shortly before the firm finally collapsed.

They went on to note that current FTX CEO John Jay Ray highlighted many of FTX’s failures this past week. Ray noted in public filings that FTX suffered from poor regulatory oversight, concentrated administrative control among inexperienced leaders, and concealed its misuse of customer funds.

Warren and Whitehouse concluded that FTX’s collapse was “not simply a result of sloppy business and management practices” but rather “intentional and fraudulent tactics employed by [FTX executives] to enrich themselves.” The two senators said that FTX’s debt discharge could total $8 billion and may be owed to one million customers, especially working and middle-class retail investors.

“We urge the Department to center these ‘flesh-and-blood victims’ as it investigates, and, if it deems necessary, prosecute the individuals responsible for their harm,” the letter reads.

This is not Warren’s first statement regarding FTX’s collapse. Alongside fellow senator Dick Durbin, she sent a letter on November 16 urging FTX to provide regulators with information. Warren also published an op-ed in the Wall Street Journal yesterday, where she called FTX’s collapse a “wake-up call” for regulators, including the DOJ, Securities and Exchange Commission, and U.S. Treasury. Recent reports suggest that some of those agencies are already in the process of investigating FTX.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other digital assets.