Custodia Bank CEO Accuses US Authorities Of Too Little, Too Late

Updated: 18 February 2023

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Caitlin Long, founder and CEO of Custodia Bank, has condemned Washington D.C. authorities and politicians over the ongoing crackdowns in the crypto industry terming them as “misguided”. She argues that the authorities ignored her warnings of fraud conducted by entities that are now bankrupt.

In her blog post titled “Shame On Washington, DC For Shooting A Messenger Who Warned of Crypto Debacle”, Long called out the government for failing to protect investors and now working to get rid of good players in the industry. ”Washington’s misguided crackdown will only push risks into the shadows, leaving regulators to play whack-a-mole as the risks continuously pop up in unexpected places,” she said.

In the blog, she reveals that she provided evidence to authorities and regulators of probable fraud crimes being committed by a big crypto firm. She argues that the evidence was presented months before the company crumbled, leaving millions of clients with losses. She also states that she informed and forewarned the authorities of an impending bank-run risk among the banks serving the crypto industry before the bank runs eventually occurred. She said:

I’ve been calling out the worst of crypto while trying to build a lawful, compliant alternative that relegates scams to the trash heap. But,… most of today’s policymakers seem intent on killing the high-integrity innovators.

However, Caitlin Long’s attempts to alert authorities on potential fraud and uncover corruption within the crypto industry backfired on her bank, Custodia. She said Custodia’s attempts at being federally regulated were rejected adding that :

Custodia Bank recently found itself in the crosshairs of Beltway Politics at their worst. Custodia was simultaneously attacked by the White House, the Federal Reserve Board of Governors, the Kansas City Fed and Senator Dick Durbin

She stressed that crypto and digital assets already exist and cannot be uninvented, hence she invited the U.S. government to come to terms with the fact and instead invite the stakeholders to the table. She stated:

“Despite the recent attacks, I remain optimistic regulators will come to realize that antidotes exist to the crypto scams seeping into the system. Few people truly understand how to separate the wheat from the chaff in crypto, and even fewer are at the table with regulators.”

U.S. regulators have it all wrong

Many crypto personalities bear similar sentiments to Caitlin Long’s having faced a similar share of struggles. Facing the same predicament is Brian Armstrong, CEO of Coinbase, whose attempts at dialogue have received a cold-blooded response from authorities such as the Securities and Exchange Commission (SEC).

Armstrong questioned the lack of regulatory clarity in the United States and what looks to be a “regulation by enforcement” strategy after the SEC’s decision to shut down Kraken’s staking services earlier this month.

1/ We're hearing rumors that the SEC would like to get rid of crypto staking in the U.S. for retail customers. I hope that's not the case as I believe it would be a terrible path for the U.S. if that was allowed to happen.

— Brian Armstrong (@brian_armstrong) February 8, 2023

Another one on the list is Jesse Powell, CEO and founder of Kraken, who is one of the latest victims of the ongoing regulatory crackdown on crypto in the U.S. In response to Caitlin Long’s tweet, Jesse said:

”I can’t tell you how infuriating it is to have pointed out massive red flags and obviously illegal activity to regulators only to have them ignore the issues for years. “They’re offshore. It’s complicated. We’re looking at everybody.” FOR YEARS. Then to be used as their example.”

His company, Kraken reached a $30 million settlement with the SEC earlier this month.