When speculating on the origin of the SEC's lawsuit, let's go back to the midterm elections in 2022. During this period, FTX, one of the largest donors to the Democratic Party, faced a crisis of user trust and triggered a run on funds, ultimately leading to its bankruptcy within a few days. This was caused by the disclosure of private financial documents by CoinDesk, a well-known media outlet in the cryptocurrency field, which pointed out potential debt issues between FTX and its sister company, Alameda Research. In this process, the presence of CZ also played a significant role.
What are the U.S. midterm elections?
The U.S. presidential election, held every four years, is one of the major global news events. In between the two presidential elections, there is an election called the midterm election, which takes place two years after the presidential election. The midterm election also has a significant impact on the country's direction.
People's attention during the midterm elections mainly focuses on the elections for the U.S. Congress, specifically the Senate and the House of Representatives. House members are up for election every two years, with all 435 seats in the House being determined through elections. Senators serve six-year terms, with one-third of the 100 Senate seats being up for election during each midterm election.
Why are the midterm elections so important? According to Gary Nordlinger, a political science professor at George Washington University, "Whichever party controls the House or the Senate can control the legislative agenda."
Nordlinger states that the majority party can decide who is in charge of important committees in Congress. The president's ability to implement their agenda also depends on whether their party controls both chambers of Congress. Although many state and local elections are held on the same day as the midterm elections, state and local elections can take place in any year and at different times within a year. This includes statewide elections for governors or state legislatures, citywide elections for mayors, local elections for judges and local officials, as well as local or state-level ballot measures.
While these campaigns may not become national headlines, Nordlinger says, "The vast majority of legislation is not considered at the federal level but at the state level."
The Democratic Party's defeat in the midterm elections
After the 2020 elections, the Republican Party remained in control of only the Supreme Court within the three branches of the U.S. government. Biden's Democratic Party gained comprehensive power, but after the 2022 midterm elections, the Republican Party became the majority in the House of Representatives. The House of Representatives has the power to enact laws, approve budgets, initiate investigations, and even impeach the president. There are over 400 members divided among various committees, with more than 20 standing committees.
The significance of the majority party in the House of Representatives lies in the fact that the chairs of various committees will be Republicans, and the position of Speaker of the House also belongs to the majority party. The Speaker of the House holds an important position in U.S. politics and ranks second in the presidential line of succession, only after the Vice President. Becoming the majority party in the House of Representatives also means that many committee chairs will be Republicans.
Perhaps more importantly, with Republicans in control of the House of Representatives, they can establish special investigative committees to investigate specific events. According to analysis by the U.S. media, many Republican congressmen are considering investigating the truth behind the chaotic withdrawal of troops from Afghanistan by the Biden administration, whether Biden's son was involved in corruption using his father's influence, and whether there were any issues with the Democratic Party's investigation into the Capitol Hill riot.
Binance.US's Political Action Committee (PAC)
At this coincidental timing, Binance.US chose to establish its own PAC. According to the application filed with the Federal Election Commission, Binance.US has applied to establish a political action committee called the "Binance.US Innovation PAC." Although the company has not detailed its intentions, the committee was established in a document submitted to the Federal Election Commission on Monday.
Krishna Juvvadi, the official financial officer involved in U.S. politics, serves as Binance.US's legal officer and was previously the chief regulatory lawyer at Uber. He did not immediately respond to requests for comment on the new political venture, nor did a company spokesperson. The name of Binance's Chief Risk Officer, Sidney Majalya, is also listed as the designated agent in one of the documents.
Coinbase, one of Binance's surviving competitors, also established a PAC known as the Coinbase Innovation PAC, although it has only received $38,000 so far, according to federal campaign records. The real focus of cryptocurrency political donations lies with two executives from FTX—former CEO Sam Bankman-Fried and Ryan Salame—who jointly oversee FTX Digital Markets and have poured tens of millions of dollars into congressional campaigns nationwide.
Binance.US PAC was established as dust settled from this month's congressional elections, giving it a full two years to prepare for the next federal campaign, including the presidential campaign.
Summary
Looking back, when regulatory issues turn into political issues, the approaches to solving them may be completely different. For example, just after resolving the U.S. debt ceiling issue, the SEC's regulatory lawsuit arrived. Was it a coincidence or unexpected? No one knows. In the latest news, Patrick McHenry, Chairman of the House Financial Services Committee, announced two hearings on oversight of the U.S. Securities and Exchange Commission (SEC), which may provide us with some answers.
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