The founder of a major crypto exchange, Sam Bankman-Fried, is under investigation after his company, FTX collapsed in late February. Now evidence has emerged that Bankman-Fried was actively donating $40 million to political candidates leading up to the fall of his company. Among all the candidates receiving money from Bankman-Fried, a majority were Democrats.
As the second-largest donor to Democrats during the 2021-2022 election cycle, Bankman-Fried had plans to spend $1 billion in American politics leading up to the 2024 election. He claimed that the money was to ensure the country is prepared for another possible pandemic. However, in the weeks leading up to FTX’s collapse, Bankman-Fried was actively pushing for more government oversight of cryptocurrency markets. He told The Los Angeles Times that “it is really important that there’s federal oversight of the crypto industry.”
Now it appears that his donations may have been an effort to influence decision-makers on Capitol Hill, who will be responsible for creating new regulations for the cryptocurrency market. Among those receiving donations from Bankman-Fried are Sens. Debbie Stabenow (D-Mich.) and John Boozman (R-Ark.), both members of the Senate Agriculture Committee which recently proposed legislation to define cryptocurrencies such as Bitcoin and Ether as digital commodities, instead of securities.
Campaign finance records show that Bankman-Fried donated the maximum amount to Boozman’s re-election campaign. Stabenow’s allied fundraising committee also received a $26,600 donation from Bankman-Fried just days before he testified before her committee.
Longtime Florida-based political strategist and professor at Florida Atlantic University, Craig Agranoff commented that it appears unlikely that Bankman-Fried’s financial contributions will protect him now due to “the amount lost and the notoriety of what occurred.” FTX customers are still trying to recover their funds after the collapse of his company.
In response to FTX’s collapse, Boozman doubled down on his belief that more federal oversight of the crypto industry is needed. In a statement, Boozman said that he and Chairwoman Stabenow remain dedicated to progressing a final version of the DCCPA that would establish a regulatory framework conducive to international collaboration while also giving consumers more certainty about the safety of their investments.
On the other hand, some politicians who received donations from Bankman-Fried have already started distancing themselves from him – and his money – as the scandal continues to unravel. The biggest chunk of Bankman-Fried’s political contributions during the 2021-2022 election cycle was a $27 million donation to Protect Our Future, a Democratic political action committee.
The FTX fiasco has triggered several investigations by forensic accountants and the FBI, who are still attempting to piece together what went wrong. At the same time, other cryptocurrency platforms, such as Binance, backtracked on bailing out the company, citing too many “irregularities” in its operations.
While the investigations continue, Bankman-Fried has seemed to disappear from public view. According to Wall Street Journal, Fried’s trading firm partner, Caroline Ellison, explained that the irregularities mainly contributed to the recent use of FTX customer funds to pay off loans made by the firm. This information was also known to FTX’s engineering director, Nishad Singh, and their chief technology officer, Gary Wang. Both could not be reached for comment.
The scandal has prompted a new wave of questions regarding the role of political money in influencing regulations and the need for more robust oversight of digital currency markets. It remains to be seen if Bankman-Fried’s donations will have any lasting impact on how lawmakers respond to the aftermath of FTX’s collapse and other cryptocurrency issues.
