Sam Bankman-Fried Lobbied Key Regulator To Let Retail Investors Borrow Money To Trade Crypto Derivates, Says CFTC Chair

Sam Bankman-Fried, the CEO of the beleaguered FTX cryptocurrency exchange, wanted regulators to let retail investors trade cryptocurrency derivatives with borrowed funds, according to the head of a U.S. regulatory agency.

What Happened: Rostin Behnam, chair of the Commodity Futures Trading Commission (CFTC), said that Bankman-Fried lobbied the regulator to modify rules so that FTX could let its users trade derivatives while using margin. 

He also asked that FTX FTT/USD offer contracts directly to users instead of going through an intermediary, according to Behnam, reported CNBC.

"It would have been a non-intermediated, margined model," he said. The proposal was a "very tricky issue from a risk perspective."

Bankman-Fried and FTX's senior leadership started visiting the CFTC in December last year to press for changes to its existing license, as per the report.

Bankman-Fried "wanted to really aggressively have this amendment passed," said Behnam.

See Also: How To Trade Bitcoin Futures: A Step-By-Step Guide

Why It Matters: FTX US Derivatives was registered with the CFTC just a week before FTX declared bankruptcy — the platform was renamed after FTX acquired LedgerX in 2021, noted CNBC.

The derivatives platform of FTX is not part of the bankruptcy proceedings and is reportedly operational even at the time of writing under the LedgerX brand. It allows traders to buy Bitcoin BTC/USD and Ethereum ETH/USD options, swaps, and futures.

Behman revealed that backers of Bankman-Fried including  Fidelity Investments, Fortress Investment Group, and even some U.S. universities appealed to CFTC in support of his plan.

The regulator is reportedly still in the process of reviewing FTX's application for an amended license.

Bankman-Fried was reported to be in talks with regulators earlier to do "right by customers."

Read Next: Sam Bankman-Fried Is A ‘Criminal,’ Says Coinbase CEO, Calls Out Mainstream Media For ‘Puff Pieces’