Why No One in Politics Wants to Talk About the Sam Bankman-Fried Scandal [View all]

[Celerity]

The fallout from the crypto controversy is widely spread — and it has hit both parties.

https://www.nytimes.com/2022/12/21/us/politics/sam-bankman-fried-ftx-political-donations.html

https://archive.ph/rfKYc


Sam Bankman-Fried in the Bahamas in April. He agreed this week to be extradited to the United States after being charged with offenses including wire and securities fraud and money laundering.

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Billboards with his frizzy-haired visage popped up in Manhattan; journalists examined his growing political empire and his “schlubby” personal style. Endless articles were written about “effective altruism,” his utilitarian-tinged philanthropic philosophy. At one point, Forbes pegged his net worth as high as $26.5 billion; Fortune ran a cover, cringe-inducing in hindsight, asking, “The Next Warren Buffett?” It’s hard to quickly sum up the extent of the influence operation Bankman-Fried, 30, and his associates built during his meteoric ascent. My colleagues have described it as “a network of political action committees, nonprofits and consulting firms” that “worked to court politicians, regulators and others in the policy orbit.”

Last week, Bankman-Fried was arrested in the Bahamas, and a federal grand jury indicted him on eight charges that include wire and securities fraud and money laundering, along with conspiracy to commit those offenses. He has agreed to be extradited to the United States as soon as Wednesday, a decision one of his lawyers said defied “the strongest possible legal advice.” Bankman-Fried has denied wrongdoing. The extraordinary financial scandal has also become a sticky political morass, sucking in dozens of lawmakers and groups. Prosecutors also accused Bankman-Fried last week of defrauding the Federal Election Commission by running what’s known as a straw-donor scheme — making political contributions under someone else’s name.

Bankman-Fried’s contributions, Damian Williams, the U.S. attorney for the Southern District of New York, said last week, “were disguised to look like they were coming from wealthy co-conspirators when in fact the contributions were funded by Alameda Research,” a hedge fund closely tied to Bankman-Fried’s cryptocurrency exchange, FTX, “with stolen customer money.” FTX, under new management, said on Tuesday that it wanted to recoup that money, and is threatening legal action if the cash is not returned voluntarily. It’s not clear how much is considered stolen, but Bankman-Fried and his associates poured at least $70 million into various campaigns over 18 months.

In 2022, Bankman-Fried donated about $40 million to various candidates and political committees, overwhelmingly to Democrats. Those donations were “mostly for pandemic prevention,” Bankman-Fried has insisted. But a less lofty aim of his influence-peddling, clearly, was to shape federal regulations in his company’s favor. Before his arrest, Bankman-Fried told Tiffany Fong, a YouTube journalist, that he had also donated about the same amount to Republicans in ways, he suggested, that would not necessarily pop up in federal campaign finance reports.

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