Warren’s alleged work with short-seller shows anti-crypto army heating up

What do progressive Democrats, Republican national security hawks and Wall Street traders have in common? They are all apparently enlisting in United States Senator Elizabeth Warren’s “anti-crypto army.” The progressive senator’s reported alliance with Marc Cohodes, a Wall Street short-seller who profited from the recent carnage at crypto banks, is the latest example. 

Crypto natives likely see the unusual pairing as further proof that entrenched interests are conspiring to kill Web3 in the United States. They aren’t entirely wrong, but America’s polarized factions are uniting against crypto for a reason. The industry has consistently failed to address valid concerns about financial crime and national security. That needs to change, or Warren’s anti-crypto army will continue attracting recruits.

Publicly traded crime scene?

In late 2022, Cohodes circulated a memo on Capitol Hill flagging “existential” regulatory risks at Silvergate, a crypto-friendly bank. The short-seller dubbed the bank a “publicly traded crime scene” and claimed, among other things, that Silvergate had “huge” Know Your Customer (KYC) and Anti-Money Laundering (AML) liabilities. These rules require U.S. financial institutions to carefully due-diligence their customers, and they are rigorously enforced.

​​Related: Elizabeth Warren wants the police at your door in 2024

Cohodes had reason to be concerned. Problems with KYC/AML compliance are rampant in crypto, and Silvergate appears to have been a striking example. According to New York magazine, Silvergate was “the go-to bank for more than a dozen crypto companies that ended up under investigation, shut down, fined, or in bankruptcy,” including FTX, the defunct crypto exchange. Cohodes claimed the bank went so far as to help FTX siphon user deposits into its sister fund, Alameda.

Silvergate shut down after FTX’s flameout in March, but its collapse may be symptomatic of serious industry-wide problems. The crypto bank, Cahodes claimed, was “a worldwide money laundering story… with a crypto wrapper.”claimed, was “a worldwide money-laundering story […] with a crypto wrapper.”

Anti-crypto army

Cohodes’ Silvergate memo reportedly found a receptive audience in Warren, who has become one of crypto’s most caustic critics. Unlike her calls for a wealth tax of up to 6% or a “just and equitable cannabis industry,” Warren’s crypto critiques are resonating far beyond progressive circles. Her message…