Congress investigates crypto firms scam protection

According to a series of letters sent on Tuesday morning, the 30th of August 2022, House Committee on Oversight and Reform requested information and documents from four agencies and five digital asset exchanges. Coinbase, FTX, Binance.US, Kraken, and KuCoin were among the parties contacted about what they are doing to protect consumers from scams and combat cryptocurrency-related fraud.

The letters request that government authorities and cryptocurrency exchanges respond by the 12th of September with details regarding their efforts to protect customers. According to the committee, the respondents' feedback will be utilised to develop legislative solutions.

The letters specifically request that the exchanges produce documents dating back to the 1st of January 2009. To demonstrate efforts to combat crypto scams and fraud, as well as efforts to identify, investigate, and remove or flag potentially fraudulent digital assets or accounts, as well as discussions about "whether to adopt more stringent policies.

In one letter to Sam Bankman-Fried, CEO and creator of FTX, the committee states that although some exchanges evaluate cryptocurrencies before listing them, others allow digital assets to sign up with little or no verification.

According to FTC analysis, more than $1 billion in cryptocurrency has been lost to fraud since 2021.

Congress looks at crypto schemes developed by companies

Chainalysis, a blockchain analytics firm, discovered that 37% of crypto scam money last year went to "rug pulls". A rug pull is when someone lists a token on an exchange and invests in it to increase the price and market demand before selling the position at a premium and disappearing with the proceeds.

Binance US, which received an investigation from the committee on Tuesday, has been charged in a class action complaint with deceiving customers about the safety of investing in terraUSD (UST) and its sister token, Luna.

The terms and conditions of the investor-crypto exchange agreement also differ, which needs to be standardised. Agencies will continue infighting and cannot successfully implement consumer and investor safeguards relating to cryptocurrencies and the exchanges on which they are traded unless clear definitions and advice are provided.