SEC Chair Gensler says rebooted FTX run by ex-NYSE chief is possible if done ‘within the law’
SEC Chair Gary Gensler mocks putting a gun to his head in response to a “Blazing Saddles” reference by Rep. Emanuel Cleaver, D-Mo., during the House Financial Services Committee hearing titled “Oversight of the Securities and Exchange Commission,” in Rayburn Building on Tuesday, April 18, 2023.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
WASHINGTON — A revived FTX could work if new leadership does so with a clear understanding of the law, SEC chair Gary Gensler told CNBC on the sidelines of DC Fintech Week.
Gensler was referring to reports that Tom Farley, a former president of the New York Stock Exchange, is among a short list of three bidders vying to buy what remains of the bankrupt crypto exchange. Farley launched his own digital asset exchange in May called Bullish, which is reportedly one of the final contenders in the bankruptcy auction.
“If Tom or anybody else wanted to be in this field, I would say, ‘Do it within the law,'” Gensler said on Wednesday. “Build the trust of investors in what you’re doing and ensure that you’re doing the proper disclosures — and also that you’re not commingling all these functions, trading against your customers. Or using their crypto assets for your own purposes.”
FTX founder Sam Bankman-Fried was found guilty last week on all seven criminal counts against him, including fraud and money laundering charges. His exchange, which filed for bankruptcy a year ago, was funneling customer money to sister hedge fund Alameda Research, according to the charges.
Alameda was a market maker for the FTX exchange, and was given privileges, such as a $65 billion line of credit requiring no collateral. Unlike other customers on the platform, Alameda was also granted the unique ability to go negative in its trading bets, without having its positions liquidated.
“We would never let the New York Stock Exchange also operate a hedge fund and trade against their members or trade against customers in the market,” said Gensler.
FTX and Alameda were supposed to be separated by a firewall. But the evidence presented in the monthlong trial made clear how cozy they were in practice.
“FTX and Alameda had an extremely problematic relationship,” Castle Island Venture’s Nic Carter told CNBC. “Bankman-Fried operated both an exchange and a prop shop, which is super unorthodox and just not really allowed in actually regulated capital markets.”
Sam Bankman-Fried stands as forewoman reads the verdict to the court.
Artist: Elizabeth Williams
Separate to the criminal charges, the SEC and the Commodity Futures Trading Commission brought civil suits against FTX. The SEC in December accused Bankman-Fried of running nothing less than a “brazen,” yearslong fraud “from the start.”
Gensler said that, when it comes to considering new rules regulating the industry, existing securities laws are “very robust and strong.” They just need to be enforced.
“There’s nothing about crypto that’s incompatible with securities laws,” he said. “You’ve got just a lot of worldwide actors that are currently not complying with these time-tested laws.”
FTX was based in the Bahamas and used mostly by customers outside the U.S., though it had a small American affiliate. Crypto exchange Binance is under fire from U.S. regulators even though it operates an international business. The SEC and CFTC have both brought charges against Binance, alleging the company and founder Changpeng Zhao have worked to subvert “their own controls” to let high-net-worth U.S. investors and customers continue trading on its unregulated international exchange.
“Think about how many actors in this space are not complying right now with international sanctions and money laundering laws and are using crypto for nefarious or bad actions,” Gensler said, without naming companies or individuals.
The SEC has recently suffered a few interim losses in the courts, including to Ripple over the $1.3 billion the company raised in what the SEC called an unregistered securities offering, as well as to Grayscale, related to the firm’s application to convert its bitcoin trust into a spot bitcoin exchange-traded fund.
Gensler said that over the last six years, the SEC has either brought or settled 150 cases in crypto. One of its legal spats is with Coinbase, a publicly traded crypto exchange in the U.S. that’s threatening to leave the country over regulatory constraints.
Gensler said companies here have to obey the law, though he avoided references to specific cases.
“If it’s a non-compliant fraudster, why would we want them in our markets?” he said.
Swift Current Energy’s 800-megawatt (MW) Double Black Diamond Solar is up and running about 30 miles west of Springfield. It’s now the largest operating solar farm east of the Mississippi, and it’s set to make a serious dent in emissions while delivering clean energy to major customers, including the City of Chicago.
Chicago is sourcing around 70% of the power for its municipal operations from Double Black Diamond. That includes big energy users like O’Hare and Midway airports. Other customers buying power from the solar farm include CVS Health, Loyola University Chicago, PPG, State Farm, TransUnion, and Cook County, all through the energy company Constellation NewEnergy.
This project has been a long time coming – Swift Current started development in 2018 and leaned into a growing US supply chain. The company sourced most of its 1.6 million solar panels from First Solar’s Ohio factories, and the racking came from Nextracker, which used US-made steel and did some of the manufacturing in Chicago. Construction created around 500 jobs.
Double Black Diamond also met Illinois’ Clean and Equitable Jobs Act (CEJA) standards for labor and hiring, creating job opportunities for a broader group of workers. Over its lifetime, the solar farm is expected to generate $100 million in local tax revenue for Sangamon and Morgan counties. About 60% of that will go toward public schools, with the rest helping fund public safety, infrastructure, and community programs. Swift Current is also putting $10 million into community benefit programs, including school districts and local governments.
Chicago Mayor Brandon Johnson called the project “a powerful example of why we believe in the green economy.” He said the solar farm helps Chicago cut emissions, supports good union jobs, and lowers energy costs for city operations.
Read more: Home solar prices just hit record lows – and storage is even cheaper
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Range Energy, a company which builds large-battery electric trailers to help fleets electrify at the drop of a hat, has announced partnerships with Thermo King and ESL Power Systems to bring its technology to refrigerated trailer units.
The idea behind Range’s product is that it adds a battery and an electric motor e-axle to a semi truck trailer, instead of to the tractor itself, which means that a fleet can add electric capabilities without having to buy new tractors. This means the fleet can effectively hybridize its operation without having to buy new tractors.
While this isn’t a fully electric solution, it can still reduce fuel usage by a large amount (independent tests say 36%), and adds new capabilities to a truck – like better control over the trailer and regenerative braking to avoid brake fade.
We met Range at ACT Expo in Anaheim two years ago, where they gave us one of the coolest demos we’ve seen. Just by attaching to a tractor’s kingpin, the system can decide how much power to apply and offers extremely natural feeling movement, making a heavy trailer feel light as a feather:
Range isn’t quite up to production yet, but they have done some trials. In addition to the independent testing above, Range trialed its technology with Petaluma Egg Farm, up in Northern California, where it says the company saw a 50-70% improvement in MPG for the trucks using Range’s electric trailer.
But the company is still working to find novel applications for its technology, and when we caught up with them at ACT Expo this week, they wanted to focus on how Range trailers could be used for refrigerated freight in order to cut emissions and reduce the need for a separate engine to run the reefer unit.
In service of this, it has partnered with two companies in the refrigeration space – Thermo King, the biggest name in electrified trucks, and ESL Power Systems, a company that manufactures shore power solutions for heavy industry.
Range said Thermo King came to them because they’re the only company with enough energy storage to be able to run a refrigerated unit for an extended period of time. While there are other companies doing electrified refrigerated trailers, Range’s trailer has a much larger 288kWh battery (since it also works as a traction battery for the trailer’s electric motor).
This means it has a lot more energy on board to run a refrigeration unit, which can draw ~5-20kW depending on several factors. Range told us that fleets have told them this would be enough energy to keep the trailer box cold for a full day while unplugged from shore power, even in hot temperatures.
And that’s a big deal, because heretofore, refrigerated units have mostly run with an additional small diesel engine. Removing that engine means less pollution, less diesel usage, more noise, less maintenance, and it also means the refrigerated unit could operate in more environments (for example, you don’t want a running engine indoors if you can avoid it – but an electric unit doesn’t have to deal with that).
Speaking of shore power, that’s what Range is working with ESL to implement. ESL creates small, modular shore power systems which are easier to install, helping fleets save on infrastructure upgrade costs. Their boxes can deliver high-powered 480V 3-phase AC charging.
Plugging into one of these would allow the Range Energy trailer to charge at up to 50kW or so, meaning a 5-6 hour charge time for the 288kWh battery.
Range has already trialed its partnership with Thermo King, in the Petaluma Egg Farm example given above. Although the ESL partnership is newer, and those will be trialed soon.
Range is targeting the end of this year, or possibly the start of next year, for its first customer deliveries.
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Environment
Podcast: Elon is still CEO of Tesla, BYD EV sales surges while Tesla’s collapse, and more
In the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy. In this week’s episode, we discuss Elon being challenged in his role as CEO of Tesla, BYD EV sales surging while Tesla’s collapse, and more.
Today’s episode is brought to you by retrospec—makers of sleek, powerful e-bikes and outdoor gear built for everyday adventure. Electrek listeners can get 10% off their next ride until May 8th with the exclusive code ELECTREK10 only at retrospec.com.
The show is live every Friday at 4 p.m. ET on Electrek’s YouTube channel.
As a reminder, we’ll have an accompanying post, like this one, on the site with an embedded link to the live stream. Head to the YouTube channel to get your questions and comments in.
After the show ends at around 5 p.m. ET, the video will be archived on YouTube and the audio on all your favorite podcast apps:
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Here are a few of the articles that we will discuss during the podcast:
Here’s the live stream for today’s episode starting at 4:00 p.m. ET (or the video after 5 p.m. ET):
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