Cryptocurrency lobbyists were so on the rise in early 2022 that an FTX executive felt comfortable emailing Federal Reserve Chairman Jerome H. Powell directly and asking him to meet with Sam Bankman-Fried, to ask the soon-to-be-disgraced founder of the cryptocurrency exchange.
It worked.
“The day in question for me is February 1,” Mr. Powell responded to a Jan. 11 email from Mark Wetjen, an FTX politician and former commissioner of the Commodity Futures Trading Commission.
Mr. Powell’s public calendar shows that he and Mr. Bankman-Fried met as planned. And Mr. Wetjen continued to send the Fed chairman two policy papers that FTX recently published, according to emails obtained through a public records request. “I hope you find these useful!” Mr. Wetjen wrote. “It’s great to have people like you serving our country.”
Mr. Powell has long been cautious about the digital currency industry, but like many others in Washington, he sought to learn more about it. FTX was eager to take over the lessons. According to newly released documents, Mr. Wetjen managed to gain access to a number of federal officials. The records show that in October 2021, Mr. Bankman-Fried arranged a virtual meeting with another senior Fed official, Lael Brainard, who is now director of the White House National Economic Council. And public calendars show that Mr. Bankman-Fried then met with another top financial regulator: Martin Gruenberg, head of the Federal Deposit Insurance Corporation.
Following the collapse of FTX last fall, the crypto industry in Washington is facing a more difficult situation. Mr. Bankman-Fried was arrested in December on fraud charges and his trial is scheduled to begin on Tuesday. The industry has also faced a sweeping government crackdown that has sent some crypto entrepreneurs abroad in search of friendlier governments.
The companies that survived the crypto downturn are still investing millions of dollars in lobbying, but they are finding it harder to gain access to the halls of power. Some congressional offices are now reluctant to meet with industry representatives. Crypto lobbyists are appearing less often on the public calendars of key regulatory officials, and companies have had to change their strategy and make an effort to differentiate themselves from FTX.
“There are a lot of people who have had difficulty holding meetings,” said Sheila Warren, head of the Crypto Council for Innovation, an advocacy group. “I have heard from some offices that they will no longer meet with certain people.”
As Mr. Bankman-Fried’s trial approaches, the crypto industry is scrambling to change the subject from FTX.
Stand With Crypto, a nonprofit backed by giant digital currency exchange Coinbase, plans to hold a “fly-in” on Wednesday where industry players from across the country will gather for talks with lawmakers.
“It’s been quieter — and in some ways more cautious — but the industry’s push hasn’t slowed,” said Mark Hays, who tracks cryptocurrency regulation at Americans for Financial Reform. “The crypto industry knows that its star on Capitol Hill has tarnished to some extent.”
In early 2022, when FTX was at its peak, the mood in Congress was friendlier towards the industry: Mr. Bankman-Fried had been positioned as something of a prodigy, eccentric and brilliant. But since the collapse, many lawmakers have argued that the industry should be more closely monitored.
“The tone has certainly changed among Democrats — they are much more skeptical,” said Bart Naylor of Public Citizen, a government watchdog that tracks cryptocurrency lobbying.
Even in 2022, regulators were hesitant to accept crypto firms. It was unusual for FTX to arrange a meeting directly with the Fed Chair.
Mr. Powell’s only other listed meetings in February 2022 were with Jane Fraser, the chief executive of Citigroup; David Solomon of Goldman Sachs; Suzanne Clark of the U.S. Chamber of Commerce; James Gorman, chairman, and Tom Wipf, vice chairman, of Morgan Stanley; Jamie Dimon, the chairman of JPMorgan Chase; the Business Council, a group of business leaders; and the head of Singapore’s sovereign wealth fund.
Mr Powell has met with other financial technology companies – for example, he spoke to a representative from payments processor Stripe in March 2022. However, based on his published calendars to date, he has no similar meetings listed in 2023.
In the meeting with Mr. Bankman-Fried, Mr. Powell and FTX officials discussed stablecoins as well as central bank digital currencies, a government-backed form of electronic cash, a person familiar with the matter said.
Mr. Wetjen knew many of the agency officials with whom he arranged meetings from his previous political roles in Washington. For example, he and Mr. Powell had worked together on regulatory issues while Mr. Powell was Fed governor, for example.
Dennis Kelleher, head of regulator Better Markets, said FTX had exercised widespread influence in broader regulatory circles, in part through Mr. Wetjen’s connections.
“That’s the problem: These relationships that aren’t visible to the public pay dividends year after year as these people come through the revolving door,” Mr. Kelleher said. FTX also flooded Washington with money, which helped it gain a foothold in congressional offices and think tanks, he and several lobbyists said.
The Fed had no comment for this article, nor did Mr. Wetjen. The White House had no comment on Ms. Brainard’s meeting with Mr. Bankman-Fried. An FDIC spokesman noted that agency leaders frequently made courtesy calls on financial company executives.
In 2022, FTX attempted to influence regulation by the Commodity Futures Trading Commission, as Mr. Wetjen made clear to Mr. Powell in an email from May this year.
“We have an application with the CFTC outlining how the agency should do this,” Mr. Wetjen wrote about regulating FTX. “All the CFTC has to do is approve it.”
The Fed has had little control over such matters, but Mr. Powell sits on the Financial Stability Oversight Council, a multi-agency regulator that includes the director of the Commodity Futures Trading Commission.
Mr. Wetjen continued: “To the extent that the crypto industry comes up in discussions at the Financial Stability Oversight Council, “we wanted you to get that context and our views at FTX.”
The company clearly failed to make much progress with the Fed chairmanship. Mr. Powell supported an October decision by the Financial Stability Oversight Council to further investigate, rather than give the green light, the type of facility FTX and other trading platforms wanted for crypto asset exchanges.
Now, FTX’s demise has only strengthened the arguments of regulators who wanted to approach crypto firms cautiously. This year, the Securities and Exchange Commission sued Coinbase and Binance, FTX’s two biggest competitors, as part of a broader government crackdown. With Mr. Bankman-Fried out of the picture, other financial technology companies are spending millions to ensure the future of regulatory oversight benefits them.
Mr. Hays of Americans for Financial Reform said the industry was rarely avoided in Washington because of “money talk.”
“I still believe doors will be opened for them.”