December 6, 2022

Fidelity Should Drop Bitcoin Retirement Plan After FTX Crash – Lawmakers

U.S. Senators today sent another letter to investment giant Fidelity Investments. In the letter, they warn against offering Bitcoin to its customers following the collapse of crypto exchange FTX.

Furthermore, senators Elizabeth Warren of Massachusetts, Tina Smith of Minnesota and Richard Durbin of Illinois all signed the letter asking Fidelity to scrap its 401(k) Bitcoin plan. 

Boston-based Fidelity, one of the world’s largest asset managers, is America’s largest provider of 401(k) savings accounts. In April, the firm launched a new product offering companies and their participating employees access to Bitcoin. 

Fidelity Needs To Reconsider

However, in May, the Senators Warren and Smith sent a letter to Fidelity telling them it was a bad idea. This time round, a new letter was sent, additionally signed by Senator Durbin. “Once again, we strongly urge Fidelity Investments to reconsider. To reconsider its decision to allow 401(k) plan sponsors to expose plan participants to Bitcoin,” Monday’s letter said. 

“The recent implosion of FTX, a cryptocurrency exchange, has made it abundantly clear. The digital asset industry has serious problems,” the senators added.“The industry is full of charismatic wunderkinds, opportunistic fraudsters, and self-proclaimed investment advisors. All promoting financial products with little to no transparency.” 

FTX was once one of the biggest cryptocurrency exchanges. But It went bust this month after it lost billions of dollars of investors’ cash. The exchange was allegedly using client money to make risky investment bets through its sister trading firm Alameda Research. 

A document filed Saturday by FTX showed the exchange owes $3.1 billion to its top 50 creditors.

Notably, FTX is also one of the biggest contributors to political campaigns. The former CEO of the exchange Sam Bankman-Fried was among the top-20 largest donors to Joe Biden’s 2020 U.S. presidential campaign, contributing $5.2 million. The crash rocked the crypto market and most digital assets have plunged following the news. 

Things Right Now At Fidelity

Today’s letter added that the U.S. was “already in a retirement security crisis.” 

Fidelity currently hasOne which “should not be made worse by exposing retirement savings to unnecessary risk.

Consequently, there are over $9.9 trillion under its administration. And it has made major inroads into the world of digital assets. Earlier this month it announced an early-access waitlist for its latest crypto product. This is an app allowing retail investors trade Bitcoin and Ethereum from their phones without paying commission fees.  

Meanwhile Elon Musk had Another Tweet Up His Sleeves

Twitter’s new owner Elon Musk dismissed a report concerning disgraced FTX founder Sam Bankman-Fried. One that suggests that Sam put $100 million into Musk’s Twitter takeover.

Responding to a Business Insider headline alleging that SBF owns a $100 million stake in the newly private Twitter. Musk tweeted simply: “False.”

The Business Insider story was a writeup of a report from recently-launched news site Semafor. Here they claim that Musk invited SBF to “roll” his existing Twitter stock into the company. One which was soon to go private under Musk’s ownership.

SBF had been buying up Twitter stock with a view to his own potential takeover. While SBF did not end up injecting any fresh cash into the deal, it was his pre-existing Twitter shares that Semafor reports were injected. Injected into the company under Musk, based on unpublished text messages Semafor cites.

Musk’s denial so far is vague, and only made response to SBF “owns a $100 million stake.” He has yet to specify what part of the report he’s calling “false.” He is also yet to clarify whether the FTX founder was involved in the deal at all. 

Augustine Ojeh

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