Operation Choke Point 2.0 Is SEC’s ‘Chemotherapy’ for $14B Ponzi Problem, BCB’s CEO Says

AUSTIN, Texas — Operation “Choke Point 2.0,” the alleged coordinated efforts by the U.S. administration to cut the cryptocurrency industry off from the banking sector, is the SEC’s chemotherapy for $14 billion dollar “ponzi cancer,” Oliver von Landsberg-Sadie, founder and CEO of BCB Group said during a panel at CoinDesk’s Consensus 2023 conference titled “Crypto Banished From the Banking System.”

Read full coverage of Consensus 2023 here

It wasn’t clear if Landsberg-Sadie’s comments were a callback to Bernard Madoff’s ponzi scheme or the spectacular collapse of crypto exchange FTX. However, he thinks that current efforts by the U.S. regulators is hurting legitimate companies like Caitlin Long’s Custodia Bank, who was also a speaker at the panel and who’s bank has been at odds with regulators. “I think Choke Point is the SEC’s chemotherapy for a giant gap, for a $14 billion Ponzi cancer and healthy legitimate organs like Custodia Bank are getting hit,” he said.

“It was a tragedy to see what happened. In this case a good actor getting the short-end of the stick of a massive crime, that SEC was right to attempt to address,” Landsberg-Sadie added.

Custodia Bank, a three-year-old special purpose depository institution in Wyoming, has been trying to push its way into the U.S. banking system. After a long wait, the central bank denied Custodia’s bid for Federal Reserve system membership in January, citing concerns about the “safety and soundness” of the bank. Shortly after, the Kansas City Fed denied Custodia’s “master account” application. Wyoming is in the Kansas City Fed’s jurisdiction.

The recent crisis has de-banked many crypto companies pushing many U.S. firms to opt for bank accounts offshore and question whether crypto industry can do business in the region.

“Events of the last six months have put a damper on entities wanting to bank this space [crypto],” said another panelist, Richard Booth, chief compliance officer of Fortress Trust Company. “But it’s legal business and I think that every business in this country is entitled to access to banking rails,” he added, noting that “the regulation I think needs to be matured. Congress has clearly advocated what they’re supposed to be doing and the regulators are struggling to keep up.”

He also said that that a “perfect model” for the crypto community for their banking needs would be a “trust model” as such financial institutions “can pretty much do everything that a bank does” and none of the assets are held on its balance sheet, which means “there’s no single point of failure.”