The CEO of Custodia Bank, Caitlin Long, said that regulators ignored her warnings about fraudulent crypto entities. Long said that her warnings to US regulators were ignored even though she alerted them to major fraud in some of the crypto companies. This was many months before they became insolvent.
Long made the revelation via a blog post on February 17, while criticizing the recent crackdown on crypto entities in the industry, calling it “misguided.”
Pushing the risks to the shadows
In a blog post titled “Shame on Washington, DC, For Shooting A Messenger Who Warned of Crypto Debacle,” the CEO blasted the government for failing to protect investors and good actors in the cryptocurrency space. She said that the approach of regulators towards crypto regulation is wrong. Her reason is that it has largely alienated good actors in the industry.
“Washington’s misguided crackdown will only push risks into the shadows, leaving regulators to play whack-a-mole as the risks continuously pop up in unexpected places,” she said.
Long said that through her experience with her digital asset custody company, she has been able to identify some of the worst players in the crypto space. She added that in the course of building a reputable and compliant crypto space, it is essential to ensure that scams and other bad actors are relegated. However, she is of the opinion that the policies being rolled out by the regulators are “killing the high-integrity innovators.”
The Coinbase experience
The Custodia Bank CEO said that her efforts to work with regulators were rebuffed. She stressed that her firm was “attacked.” The culprits were the White House, the Federal Reserve Board of Governors, the Kansas City Fed, and Senator Dick Durbin. This was because of her firm’s desire to be accepted as a federally regulated entity.
Long poked holes in the stance of bipartisan policymakers that they want crypto entities to be regulated, rebuffing her firm. She said that Custodia was disparaged for “daring to come through the front door.”
Long’s stance is not different from that of the CEO of Coinbase, Brian Armstrong. Armstrong said that the attitude of the Securities and Exchange Commission towards crypto companies is, at best, frosty. He said that this is especially true for those companies trying to maintain communication with the regulator.
Extreme measures
Armstrong had earlier said that the US lacks a clear regulatory framework for crypto entities. This became apparent as the SEC made moves to shut down the staking service of Kraken on February 9.
Long has said that most of the recent actions of the US government are reactionary. This is due to the obvious embarrassment resulting from their inability to stem crypto frauds. She said that the action of the regulators is akin to throwing away the baby with the bath water. This is especially so considering that many of these policy makers were impressed with some of the shady crypto companies.
“Calls for a crackdown today are coming from many of the same policymakers who were charmed by the fraudsters.” In a 180-degree turn, they’re now throwing the baby out with the bathwater.”
Ignored warnings confirmed by Kraken CEO
In some Twitter posts, Long said that she tried to warn the government and regulators of the fraud that was going on in some crypto companies. Her objective, according to her, was to stop a major fraud with the help of regulators. Long said that she did this months before the company imploded, leaving investors with millions of dollars in losses.
The CEO of Kraken, Jesse Powell, was one of the respondents who agreed with Long’s stance. in his response to the Twitter post. Powell said,
“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.”
Image credit: Coindesk
