Lawmakers Probe Coinbase, Binance, FTX Over Crypto Fraud

The House Committee on Oversight and Reform has asked four US agencies and five crypto exchanges to detail how they combat fraud and scams

article-image

US Capitol Building | Credit: Shutterstock

share

key takeaways

  • Five major cryptocurrency exchanges have been requested to submit documents to the US lawmakers
  • Federal agencies were asked whether crypto holdings should be treated as commodities, securities, or both

Nearly half a million people have lost more than $1 billion to crypto crime and fraud since the beginning of last year — a figure that’s now prompted a US House of Representatives committee to investigate how major exchanges such as Coinbase, FTX and Kraken operate.

Rep. Raja Krishnamoorthi, who chairs an oversight committee on economic and consumer policy, sent letters to four federal agencies and five crypto exchanges on Tuesday, requesting information on the mechanisms they have in place to tackle fraud and scams.

His nine letters were sent to the US Treasury, Securities and Exchange Commission (SEC), Commodity Futures Trading Commission, Federal Trade Commission, Binance.US, Coinbase, FTX, Kraken and KuCoin.

“The lack of a central authority to flag suspicious transactions in many situations, the irreversibility of transactions, and the limited understanding many consumers and investors have of the underlying technology make cryptocurrency a preferred transaction method for scammers,” Krishnamoorthi wrote.

“For all these reasons, I am concerned about the growth of fraud and consumer abuse linked to cryptocurrencies.” The five crypto exchanges weren’t asked the same questions.

The Congressman highlighted the Department of Justice’s recent indictments to point to fraudulent coin offerings and sham investment platforms as examples of fraud. 

Software developers have also taken advantage of heightened interest to create tokens, list them on exchanges and pump them before fleeing with investor funds, Krishnamoorthi noted.

Blockchain analytics platform Chainlysis estimates these so-called rug pulls made up about 37% of scam revenue in 2021 — a massive jump from just 1% in 2020.

Krishnamoorthi asked the agencies and companies to provide specific information that would assist Congress in drafting legislation aimed at stabilizing the industry, with a September 12 deadline.

“Should cryptocurrency holdings be treated as commodities, securities, or both? Please explain,” one of the questions asked. The matter has stirred debate especially since the SEC recently charged a former Coinbase product manager with insider trading, alleging that he purchased at least nine crypto tokens that classify as securities.

Image source: Chainalysis

Krishnamoorthi’s request for information from the crypto industry highlights increasing steps taken by authoritative agencies to rein in firms working in the space. 

The Federal Bureau of Investigation on Monday also warned of mounting instances where criminals are exploiting investor interest in cryptocurrencies. Data from Immunefi shows hacks against DeFi (Decentralized Finance) protocols resulted in losses over $1.2 billion in the first quarter, an almost eight-fold increase compared to the same time last year.

In July, Democrats sought information specifically from cryptocurrency miners. After arriving at “disturbing” findings into the environmental impact of crypto mining, Sen. Elizabeth Warren and US Rep. Rashida Tlaib were among six lawmakers who requested miners disclose their emissions and energy use.


Get the news in your inbox. Explore Blockworks newsletters:

  • Blockworks Daily: The newsletter that helps thousands of investors understand crypto and the markets, by Byron Gilliam.
  • Empire: Start your morning with the top news and analysis to inform your day in crypto.
  • Forward Guidance: Reporting and analysis on the growing intersection of crypto and macroeconomics, policy and finance.
  • 0xResearch: Alpha directly in your inbox. Market highlights, data, degen trade ideas, governance updates, token performance and more.
  • Lightspeed: Built for Solana investors, developers and community members. The latest from one of crypto’s hottest networks.
  • The Drop: For crypto collectors and traders, covering apps, games, memes and more.
  • Supply Shock: Tracking Bitcoin’s rise from internet plaything worth less than a penny to global phenomenon disrupting money as we know it.
Tags

Upcoming Events

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

Research Report Templates.jpg

Research

Bluefin possibly stands at an inflection point. The token is near an all-time low yet the protocol’s spot volume market share and derivatives exchange usage have been increasing month over month since its November launch. Given its current market position and the upcoming upgrades (for both Bluefin and SUI), there may be upside potential before the increased supply growth in December. However, strong opposition from existing competitors (like Cetus and Suilend), as well as new entrants (like Aftermath), pose key challenges to Bluefin’s medium-term success.

article-image

Top Committee Democrat Sen. Elizabeth Warren in her opening statement accused Atkins of “helping billionaire CEOs like Sam Bankman-Fried”

article-image

Introducing garbled circuits for enhanced privacy and regulatory compliance

article-image

Ross Ulbricht was a freedom maximalist building freedom tech, powered by Bitcoin

article-image

Solana validators can reap benefits including payments, votes and community clout

article-image

Sponsored

WalletConnect is cementing itself as the essential connectivity layer, ensuring wallets remain the entry point for billions of users

article-image

According to a legal filing, Galaxy Digital helped boost the price of LUNA while quietly selling its tokens