Eva Marie Uzcategui | Bloomberg | Getty Images Sam Bankman-Fried, co-founder of bankrupt crypto firm FTX, spent nearly a year trying to convince regulators to let him introduce a derivatives product that would allow retail investors to trade with borrowed money, according to Rostin Behnam, president of Commodity Futures. Trade Commission. In an interview on CNBC’s “Squawk Box” on Wednesday, Behnam said Bankman-Fried has been lobbying the CFTC to modify the rules so that FTX allows users to trade derivatives using margin instead of paying up front. It also wanted to offer the contracts directly to users, without having to go through a futures dealer.

Cathie Wood’s ARK Invest Continues to Buy More Crypto Assets Despite FTX Bankruptcy “It would be a non-intermediate, marginalized model,” said Behnam, who described the proposal as “a very difficult issue from a risk perspective.” Before filing for bankruptcy last week, FTX had a CFTC-registered derivatives platform called FTX US Derivatives. The platform was a rebranding of LedgerX, a company that FTX acquired in 2021. FTX US Derivatives is one of the few FTX-related properties that is not part of the bankruptcy process and remains in operation today. However, it appears to have returned to using the LedgerX brand. If you go to the FTX US Derivatives website, it redirects you to ledgerx.com. And Zach Dexter, who was CEO of FTX US Derivatives, says on his LinkedIn profile that he is CEO at LedgerX. The platform allows traders to buy bitcoin and ethereum options, swaps and futures. Beginning in December 2021, Bankman-Fried and his senior leadership team made frequent visits to the CFTC to advocate for an amendment to its existing license, Behnam said. Asked what Behnam thought of Bankman-Fried while meeting with him for nearly a year, the chairman said the former head of FTX “knows the markets, at least tries to suggest that” and “wanted to really have aggressively. the amendment was passed.” Bankman-Fried’s supporters went directly to the CFTC to support its plan, Behnam said. They included Fidelity Investments, Fortress Investment Group, and even universities from across the country. FTX, which was valued at $32 billion by private investors earlier this year, surged in spectacular fashion last week as reports of liquidity problems resulted in customers withdrawing billions of dollars a day from their accounts. However, FTX did not have the capital to satisfy these requests because it had used customer deposits for various purposes, including trading in Bankman Fried’s hedge fund, Alameda Research. Bankman-Fried also revealed on Twitter on Wednesday that FTX had built up about $13 billion in leverage. Behnam said his agency officials were still in the process of reviewing FTX’s application for a modified license when FTX and about 130 additional affiliates, including Alameda and FTX’s U.S. subsidiary, collectively filed for bankruptcy. LedgerX has since reportedly withdrawn its application for leveraged derivatives trading. Before the boom, Bankman-Fried was trying to play the role of industry savior as the cryptocurrency market sank and lenders and hedge funds surged. In May, it also bought a 7.6% stake in trading app Robinhood, which at the time had lost more than three-quarters of its value since its IPO last year. In April, FTX bought a stake in the IEX stock exchange. “If you think about it, in retrospect, with the acquisition of Robinhood and its relationship with IEX – it goes beyond crypto what FTX was trying to do,” Behnam said. WARNING: Authorities are trying to bring Sam Bankman-Fried to the US for questioning