'These Aren't Theoretical Arguments': Raphael Warnock Gets Testy With Experts Over Crypto Scams

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During a Senate Banking Committee hearing on Wednesday, Sen. Raphael Warnock (D-GA) asked former CFTC Chairman Timothy Massad about the likelihood of cryptocurrency being used for scams.

Transcript

00:00Senator Warnock you have six minutes. I was going to ask you, Brother Chairman.

00:06Brother Senator, I knew you were going to ask me the question. You're also a pastor.

00:11Thank you so much. I may not need it. Thank you. As this committee begins work on...

00:16As this committee begins work on bipartisan legislation to provide

00:22certainty and clarity to the crypto market, it's critical that any bill we

00:27advance provides strong consumer protections. And this is why I'm

00:32incredibly concerned about the rise in so-called meme coins. In February the SEC

00:40published a staff statement on meme coins warning that they expose amateur

00:47investors to quote rug pull and pump and dump schemes. Mr. Masid, what do you think

00:55the effect of this staff memo will be on investors in meme coins and do you think

01:01the SEC will bring civil actions or enforcement against any of these scammers?

01:07Senator, thank you for the question. I think the SEC has said that these are not

01:12securities and I would agree with that. The issue then becomes if they're being

01:17listed on platforms such as centralized exchanges where people are trading Bitcoin,

01:24what should we do about that? People say we want to regulate those platforms insofar as

01:29they trade Bitcoin. We should either say they can't trade other things that aren't

01:33regulated or whatever they trade has to be subject to the same regulations. I think in

01:39terms of immediate effects, you know, you have these things being traded and

01:44people can get, can misunderstand them, can get defrauded. I don't expect the SEC or

01:50anybody else to take actions about that unless it was really a very, very serious

01:55case of fraud and that would be up to the Justice Department. So, you know, these

02:00issues, I think it's important that we recognize that these aren't theoretical

02:03arguments, they impact real people and their actual lives. An analysis of coins

02:09issued on Pump.fund, a popular meme coin generating site indicated 60% of users on

02:16the platform lost money with 1,700 wallets suffering losses that exceeded $100,000. What

02:24do you need, Mr. Masid, what do we need to see in a Senate bill to protect consumers from meme coin scams?

02:33Without sacrificing innovation in the market, I think we don't have to embrace the false

02:39choice between innovation and giving consumers reasonable protection. What would you like to

02:45see in a Senate bill? Well, what I'd like to see is consistency between what we allow these

02:52centralized exchanges that are trading Bitcoin to trade and what's subject to the bill. In other words,

03:00if we're going to regulate those centralized exchanges when we should do that,

03:04and they shouldn't be allowed to list things that aren't then subject to all those same regulations.

03:10And right now the bill is very inconsistent in that respect because it excludes those meme coins

03:17from digital commodities, but it doesn't prohibit the listing of those meme coins on these very same

03:23exchanges. So I look forward to working with my Republican colleagues as we think about these

03:30issues. This year alone, President Trump and his family have launched a meme coin, a stable coin,

03:38and a governance token. The Trump family has also indicated that they may offer a crypto wallet as

03:44well as other crypto products. They're quite active in this space. Mr. Painter, how does President Trump's

03:50promotion of cryptocurrency, including his meme coin and his family's company intersect with his official

03:58duties and his administration's policies? If Donald Trump were the treasury secretary

04:06and regulating crypto and had those interests, he would be guilty of a felony under 18 United States Code 208,

04:14the statute I referenced before, which Congress has passed and imposed on every employee of the United

04:20States government except for the members of Congress, the president, the vice president. And this is

04:26just unacceptable to have a president who is in charge of the regulatory apparatus for any industry,

04:32including crypto, while he has such a vast interest in crypto, including a meme coin that I understand

04:38has lost somewhere around 70 percent of its value since Inauguration Day, I believe. I don't know who

04:44lost money on that, but I think I know who made money. Yeah. Quickly, yes or no. So do you

04:50believe that the president having an outsized role in so many digital asset offerings will lead to fair and

04:57innovative markets? I think. No, it will lead to a lack of confidence in our regulatory system.

05:04Just as like this Congress, everyone's receiving campaign contributions from the crypto industry and voting on

05:09this bill. And then if a witness comes here and disagrees with you, you call him a whack job. I mean, this is

05:15embarrassing. What's going on in this town? I agree that President Trump's crypto corruption distorts

05:23the digital asset marketplace. And writing a bill with a corruption caveat for the president sends a

05:31clear message that Congress is not serious about addressing corruption, which we know undermines

05:37investors' faith in capital markets. His corruption creates an unfair market that stifles innovation

05:44because his investors justifiably do not want to compete against the president of the United States.

05:52Ironically, for those who want to see us do something on market structure, it seems to me that

05:57that's not a fair market or a free market. Thank you very much for your testimony. Amen.

06:00Amen. You see, he said amen to the preacher.

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