In late November, Sam Bankman-Fried, co-founder of cryptocurrency exchange FTX and trading firm Alameda Research, gave one of his first interviews since FTX filed for bankruptcy protection. He made some remarkably offhand remarks, indicating that the political implications of his actions may be much broader than previously thought. In recent years, Bankman-Fried had become one of the most prominent donors to the Democratic Party: during the last election cycle alone, he donated about $40 million to campaigns and political groups that were mostly Democratic. Last spring, he said he could spend between a hundred million and a billion dollars during the 2024 election cycle. In the November interview, which was with Tiffany Fong, who hosts a cryptocurrency-themed YouTube channel, Bankman-Fried said that, contrary to his reputation as a powerful broker for progressive causes, he gave about the same amount to Republicans through so-called dark money contributions. “All my Republican donations were obscure,” said Bankman-Fried, in his characteristic vague but arrogant style. “And the reason was not for regulatory reasons. It’s because reporters freak out if you donate to the Republicans – they’re all super liberal. And I didn’t want to have that fight. So I left all the republicans gloomy. (Bankman-Fried also made some public donations to Republicans.)
FTX, which was one of the largest cryptocurrency exchanges in the world, filed for bankruptcy in early November after cryptocurrency markets fell sharply last spring. It soon became clear, according to prosecutors, that Bankman-Fried had used client funds to pay off debts at Alameda, his closely held hedge fund. A few weeks later, Bankman-Fried was indicted, in one of the biggest financial fraud cases since Bernie Madoff; he was extradited to the United States from the Bahamas in late December. (Bankman-Fried denied that he knowingly mixed client money with Alameda funds.) Prosecutors alleged that he used client funds to make campaign donations, that he used FTX corporate funds to make donations, that he violated federal funding limits campaign, and that he made donations on behalf of someone else. The Justice Department did not provide details about these potential violations, other than saying that his donations totaled “tens of millions of dollars.” (Bankman-Fried has pleaded not guilty to all charges. His lawyer, Mark Cohen, said Bankman-Fried is “reviewing the allegations with his legal team and considering all of his legal options.”)
Since Bankman-Fried’s arrest, Republican commentators have argued that the case represents a devastating political scandal for Democrats. Many Democratic groups, including the Senate Majority Political Action Committee, and several politicians – including former Texas gubernatorial candidate Beto O’Rourke, who received a publicly disclosed $1 million donation from Bankman-Fried – announced who are donating the money back or donating it to charity. “Anytime there’s someone in the news for something bad, there’s pressure on candidates and members of Congress to return that person’s donations or donate those donations elsewhere,” Jordan Libowitz, director of communications for Citizens for Responsibility and Ethics in Washington (TECHNICAL TEAM), a campaign finance watchdog group, told me. Individual political donations are capped at about $3,000 per election, so the financial cost is especially low for recipients who have received relatively small amounts to pay back the money and avoid negative news tying them to the scandal. “In that case, there is the question of whether that money was [Bankman-Fried’s] to begin with, or whether it was obtained illegally,” Libowitz said. “And in that case, there could be some recovery as the lawsuits try to get some of that money back to the people it belonged to in the first place, which makes this case a little bit different than your normal lawsuit. the mill.”
There is also another category of political giving, involving dark money donations. These donations are funneled through non-profit organizations that call themselves “social welfare” groups and claim that they are not primarily aimed at influencing election outcomes. The undisclosed part is that many of these groups are, in fact, primarily engaged in political activities designed to influence elections, such as television broadcasts or online advertisements criticizing a candidate. There are no limits on these donations because they are technically for non-profit organizations and their donor lists are usually kept secret. Because of secrecy, it’s impossible to know whether Bankman-Fried’s comments about giving equal amounts to Republicans are true. If they are, though, they seem to run counter to the preferred Republican narrative about the case.
By describing his donations of obscure money as being “to the Republicans”, as Bankman-Fried did, he acknowledged that the money was given directly to fund political activities – and that could mean that his actions were against the law. “Basically, shady money is made with a wink and a nudge: you say, ‘I’m only giving money to this group because I like their social welfare mission, and they can use it for whatever they want,’ and then they pick him for politics,” Libowitz said. “What he is saying is that they are using it to do politics, and political donations have to be disclosed. We don’t normally see someone just telling the press they were doing this. This was a really amateur hour. In early December, TECHNICAL TEAM filed a complaint with the Federal Election Commission, which is separate from the federal charges, alleging that Bankman-Fried admitted to violating campaign finance laws. (Bankman-Fried’s lawyers declined to comment on this matter.) There have been other cases of individuals trying to illegally conceal their political donations, but what makes Bankman-Fried’s case different is that the money was allegedly not his to give.
The Federal Election Commission is expected to investigate the allegations in the complaint TECHNICAL TEAM, a process that can take several years. That means answers are likely to emerge more quickly from the criminal case against Bankman-Fried. His trial is scheduled to begin this fall. At his arraignment in January, he wore a dark suit and tie, which created an odd contrast to his unruly, curly hair. When the time came, Cohen, Bankman-Fried’s attorney, rose to address Judge Lewis A. Kaplan: “He pleads not guilty to all charges.”
The hearing offered a glimpse into the months of legal proceedings to come. Bankman-Fried was released from prison on a $250 million bond – one of the largest in recent memory – which was co-signed by his parents, who pledged their California home as collateral. Two other individuals also signed the bond, and it suggests that Bankman-Fried, despite everything he’s supposedly done, still has rich and powerful allies willing to back him up. If he fails to appear in court in the future, the co-signers could be liable for the full amount of the bond. During the hearing, the judge said he would accept a motion filed by Bankman-Fried’s lawyers to keep the names of the co-signers secret because disclosing their names would attract a flood of media attention. But the judge noted that the names may not be secret forever. “I anticipate the possibility that members of the media or others may want to challenge the sealing of this information,” said Judge Kaplan. “And they should have the opportunity to do that.”
The judge set a tentative trial date of October 2, and the parties discussed a timeline for producing the discovery. Finally, Danielle Sassoon, one of the promoters, requested an additional condition prohibiting Bankman-Fried from “accessing or transferring any assets” of FTX. The request appears to come in response to reports that someone withdrew digital assets from Alameda accounts days after Bankman-Fried was released on bail. in a recent tweetthe former CEO said he was not the person behind such transactions.
At the hearing, Cohen, appearing displeased, reiterated that his client had not transferred those assets. Sassoon responded that the government was still investigating the matter, adding that “our investigation revealed that he tweeted knowingly about false statements before” and that “he had access to these wallets”. She went on to say that the government was aware, through a co-conspirator who was evidently cooperating with the prosecution, that Bankman-Fried had worked with foreign regulators to transfer assets into their jurisdictions. He allegedly told the co-conspirator that he wanted to try to “delay” US legal proceedings and curry favor with foreign regulators, who might be more lenient with him. The judge granted the prosecution’s request. Cohen, looking even less happy, said her client was forced to make the transfers abroad. The comment was still hanging in the air when the hearing ended. Bankman-Fried left the courtroom with his lawyers, pushed his way through a wall of television cameras on the street, and got into a waiting vehicle, which quickly left. ♦
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