As Sam Bankman-Fried fraud trial begins, Governor Newsom can act right now to protect California consumers in crypto
Two Bills on Governor’s Desk Would License & Regulate Crypto and “Crypto Kiosks” to Help Protect Consumers from Scams and Rip-Offs
For Immediate Release || Wednesday, October 4, 2023
SACRAMENTO, CA – As the federal fraud trial of FTX founder Sam Bankman-Fried began in New York, the Consumer Federation of California is urging California Governor Gavin Newsom to take swift action to help protect California consumers from the kinds of activities Bankman-Fried, known as SBF, is accused to have engaged in.
Two bills that license and regulate crypto and so-called crypto kiosks while protecting consumers are on the Governor’s desk, both sponsored by the Consumer Federation of California. AB 39 by Assemblymember Tim Grayson (D – Concord) would create a crypto licensing program for digital financial assets that would set consumer protection and accountability standards for an area that California’s Department of Financial Protection and Innovation (DFPI) says is their #1 source of consumer complaints and problems. SB 401 by Senator Monique Limón (D – Santa Barbara) and Senate President pro Tempore Toni Atkins (D – San Diego) would regulate crypto kiosks and cap fees paid by consumers from these devices, which are disproportionately located in poor and minority communities and prey upon lower-income California consumers.
“While the feds try to prove their case against Sam Bankman-Fried for running one of the biggest scams ever Governor Newsom should show leadership by signing these two bills to bring consumer protection to the crypto industry,” said Consumer Federation of California Executive Director Robert Herrell. “Democrats and Republicans in the California Legislature agree with CFC and our broad coalition that crypto needs basic rules, licensing and consumer protections. Governor Newsom should sign these two bills now to show that California won’t stand for ripping our consumers off.”
In October 2022 Governor Newsom vetoed a crypto licensing bill, AB 2269, also by Assemblymember Grayson. Since that veto key players in the crypto industry collapsed, led by FTX, the company SBF founded, and countless consumers have been ripped off by the alleged wrongdoing of SBF and his cronies.
The Los Angeles Times reported earlier this year that SBF previously had praised a May 4, 2022 Executive Order about crypto and blockchain authored by Governor Newsom. SBF tweeted the morning of May 4, 2022 that he was “really excited to see CA taking the initiative on blockchain policy to protect consumers, provide oversight, and help grow the economy. Excited to work with @GavinNewsom on this!” (The tweet was subsequently removed but had been archived.)
In the beginning of the trial today the federal government alleged that the 31-year-old Bankman-Fried stole $8 billion from FTX, the crypto exchange he founded, both for his personal use and to cover ballooning losses at Alameda Research, a crypto hedge fund run by SBF and his on-and-off girlfriend, Caroline Ellison, who will be testifying for the prosecution. Prosecutors asserted in court that SBF “lied to the world” and “committed fraud on a massive scale” by stealing “billions of dollars from millions of customers.”
The two bills on Governor Newsom’s desk are supported by a wide range of groups, from consumer organizations such as CFC to small business, financial services and senior organizations.
Over the years digital financial assets, including cryptocurrencies and crypto exchanges, have exponentially grown without proper regulation, leading to a growth in scams, “rug pulls”, investment-related fraud, and substantial losses that significantly target low-income communities and communities of color. Crypto kiosks are commonly associated with criminal activity and fraud, law enforcement agencies continue to warn consumers about the emerging risks associated with crypto kiosks. The number of crypto kiosks has also grown considerably in recent years with 3,400 kiosks in California alone. AB 39 and SB 401 allow California to retake a leading position in protecting consumers while encouraging responsible innovation.
Governor Newsom has until October 14th to decide the fate of the two bills.
About the Consumer Federation of California: The Consumer Federation of California is a nonprofit advocacy organization that, since 1960, has been a powerful voice for consumer rights. CFC campaigns for laws and regulations that place consumer protection ahead of corporate profit, either in front of the California Legislature or before state agencies in support of consumer regulations.