US lawmakers quick to unload FTX founder’s contributions

Legislators are donating contributions from disgraced crypto mogul Bankman-Fried but could still be on the hook for the money.

A portrait of Sam Bankman-Fried. He has dark, curly hair and looks serious
The US government has charged disgraced crypto tycoon Sam Bankman-Fried with a host of financial crimes [File: Saul Loeb/AFP]

A writer’s workshop in Alaska. Food banks in California. A charity that fights diabetes.

These groups are the unintended recipients of donations from onetime wunderkind Samuel Bankman-Fried. He had sent them to United States lawmakers who now can’t move fast enough to offload the contributions from the disgraced crypto mogul to anywhere else but their own campaign coffers.

Before his arrest in the Bahamas this week, Bankman-Fried, the former CEO of the now-bankrupt cryptocurrency exchange FTX, was a prolific political donor to individual candidates – from local campaigns all the way up to President Joe Biden – as well as large political action committees, or PACs, which can wield outsized influence in campaigns. But in a matter of days, Bankman-Fried became a pariah facing charges of massive financial fraud and decades in prison.

The Associated Press contacted more than four dozen current and incoming lawmakers who received campaign contributions from Bankman-Fried ahead of November’s election. It’s a group that includes members of both political parties and chambers of the US Congress but that is predominantly Democrats of the House of Representatives. Many of the recipients of Bankman-Fried’s cash were quick to respond, stressing that they had already donated or plan to send the money to charities. Several also stressed that the lawmakers did not solicit the contributions from Bankman-Fried.

Recipients of Bankman-Fried’s campaign largesse included lawmakers at the most senior levels of the House and Senate Democratic leadership. Representative Hakeem Jeffries, the incoming leader of House Democrats, donated his contribution to the American Diabetes Association. Pete Aguilar, who will be the third-ranking House Democrat next year, donated his contributions from Bankman-Fried to local charities last month.

In the Senate, Majority Whip Dick Durbin, the number two Democrat in the chamber, will donate his contribution to an “appropriate charity”, a spokeswoman said. Incoming Senate President Pro Tempore Patty Murray, a Democrat who will be third in line in the presidential line of succession next year, plans to donate her cash to a charity in her home state of Washington.

Senator Tina Smith, a Democrat of Minnesota, donated Bankman-Fried’s contributions to Planned Parenthood, which runs reproductive health clinics. Senator Alex Padilla, a Democrat of California, sent his cash to food banks across his state. Senator Lisa Murkowski, a Republican from Alaska, donated her contribution to Storyknife Writers Retreat in Homer, Alaska.

Democratic Representative Ruben Gallego of Arizona, who is strongly hinting he’ll challenge Democrat-turned-independent Kyrsten Sinema for the Senate, gave the $5,800 he received from Bankman-Fried to incoming Democratic Congresswoman Andrea Salinas of Oregon. In her Democratic primary, Salinas defeated a rival backed by millions of dollars of spending from Bankman-Fried.

“Congress must take immediate action to regulate the crypto industry, implement strict oversight standards and shield consumers from schemes like this in the future,” said Representative Angie Craig, a Democrat from Minnesota who added that she will donate her Bankman-Fried contribution to a bankruptcy fund to compensate FTX customers.

‘Egregious example’ of corruption in politics

The main campaign committees dedicated to electing congressional Democrats also received tens of thousands of dollars from Bankman-Fried while the House Majority PAC, a deep-pocketed outside group backing House Democrats, got a $6m contribution, according to Federal Election Commission records. The Democratic Congressional Campaign Committee and the Democratic Senatorial Campaign Committee did not return requests for comment on what the groups planned to do with Bankman-Fried’s contributions. The House Majority PAC declined to comment.

The White House has also been mum on the multimillion-dollar boost Biden received from Bankman-Fried. Press Secretary Karine Jean-Pierre referred inquiries to the Democratic National Committee, which declined to comment.

Then there were the millions given to more obscure political action committees: The Protect Our Future PAC, financed by Bankman-Fried, spent up to $2m on ads to support Lucy McBath, who ran a successful campaign in Georgia against incumbent Representative Carolyn Bordeaux. Bankman-Fried wired at least $27m to the PAC in 2022, according to federal election records.

In an interview with The Associated Press, Bordeaux said the dilemma surrounding Bankman-Fried’s campaign spending isn’t as simple as returning individual donations. In some cases, the money already has been used to affect elections.

“The larger issue at play is the super PACs,” Bordeaux said. “That’s not something they can refund. Here is an example of a billionaire using money he stole and diverted into political contributions. It’s an egregious example of the corruption in our political system.”

“This is a good opportunity to reopen the conversation about campaign finance reform,” she said.

On the hook to return money

Brett Kappel, a longtime campaign finance attorney who has worked for both Republicans and Democrats, said it would be “prudent” for members of Congress who received donations from Bankman Fried or other FTX officials to set the money aside “given the high likelihood the bankruptcy receiver will be seeking their return”.

That’s because, in bankruptcy cases, courts have often sided with those looking to recoup money that they unfairly lost. Lawmakers who gave donations from company officials to charity could still find themselves on the hook to return the money they received – or face the perilous optics of stiffing constituents who lost investments when FTX melted down.

Still, the lawmakers face no liability themselves “unless they knew the contributions were illegal at the time they received them”, Kappel said.

The US government charged 30-year-old Bankman-Fried with a host of financial crimes this week, alleging he intentionally deceived customers and investors to enrich himself and others while playing a central role in FTX’s multibillion-dollar collapse.

Among the counts listed in his indictment is conspiracy to defraud the United States and violations of campaign finance laws. At a press conference on Tuesday, US Attorney Damian Williams said Bankman-Fried made “tens of millions of dollars” in illegal campaign donations.

A Securities and Exchange Commission (SEC) complaint alleges that Bankman-Fried raised more than $1.8bn from investors since May 2019 by promoting FTX as a safe, responsible platform for trading crypto assets but instead diverted customers’ money to a privately held crypto hedge fund called Alameda Research LLC without telling them.

The SEC says Bankman-Fried then used those customer funds to make undisclosed venture investments, lavish real estate purchases and large political donations. He contributed funds to both political parties, Bankman-Fried said in an interview last month, adding that “all my Republican donations were dark”, meaning undisclosed.

Ryan Salame – the co-CEO of FTX Digital Markets, one of FTX’s affiliates – contributed millions of dollars to Republicans on behalf of Bankman-Fried.

Source: AP