As FTX investors were bilked, DC politicians benefited from Bankman-Fried's alleged fraud

The disgraced crypto mogul allegedly began committing fraud from FTX's inception, all the while donating millions to lawmakers and political groups in what prosecutors say was a bid to buy influence across the nation's capital.

Published: December 14, 2022 7:19pm

Updated: December 15, 2022 11:07pm

As the dust settles from FTX's epic collapse and investors try to recover billions of lost dollars, it's becoming increasingly clear that one group benefited greatly from Sam Bankman-Fried's alleged fraud: the D.C. politicians he wanted to influence.

Lawmakers, primarily Democrats, and organizations backing them raked in millions in campaign cash from Bankman-Fried and his top lieutenants, who allegedly broke several election finance laws in a bid to buy influence across the nation's capital, according to federal prosecutors and the extensive money trail of his political donations.

Bankman-Fried, founder and former CEO of the now-bankrupt cryptocurrency giant FTX, was arrested Monday by Bahamian authorities at the request of the U.S. government. The next morning, the Justice Department, Securities and Exchange Commission (SEC), and Commodity Futures Trading Commission all filed civil and criminal charges against him in "parallel actions."

Bankman-Fried could face up to 115 years in prison if convicted on all eight counts against him in a newly unsealed indictment from the Justice Department. Federal prosecutors from the Southern District of New York are accusing the disgraced crypto mogul of wire fraud, wire fraud conspiracy, and conspiracy to commit money laundering, among other charges.

The indictment came in the wake of FTX filing for bankruptcy last month. According to prosecutors and the indictment, however, Bankman-Fried's alleged criminal activity dates back to well before the company's fall to at least 2019, when the cryptocurrency exchange was founded.

"From 2019 until earlier this year, Bankman-Fried and his coconspirators stole billions of dollars from FTX customers," Damian Williams, the U.S. attorney for the Southern District of New York, told reporters. "He used that money for his personal benefit, including to make personal investments and to cover expenses and debts of his hedge fund, Alameda Research."

Bankman-Fried also allegedly broke several federal campaign finance laws "by causing tens of millions of dollars in illegal campaign contributions to be made to candidates and committees associated with both Democrats and Republicans," said Williams. "And all of this dirty money was used in service of Bankman-Fried's desire to buy bipartisan influence and impact the direction of public policy in Washington."

The indictment paints a picture of a tangled web of campaign law violations. Prosecutors say Bankman-Fried conspired with others to make political contributions in the names of other people — a tactic that can be used to mask the true donor's identity or circumvent limits on campaign contributions.

It's also alleged that Bankman-Fried conspired with others to use corporate funds to donate to federal candidates and joint fundraising committees. By law, corporations are prohibited from donating to federal political candidates.

Separately, the SEC charged in a civil complaint filed in federal court that Bankman-Fried illegally steered money from Alameda Research, his crypto hedge fund, to federal political candidates.

Bankman-Fried "used commingled funds from Alameda to make large political donations," alleged the SEC, which added he also used Alameda "as his personal piggy bank."

Foreign nationals — including companies incorporated abroad such as Alameda, according to the Federal Election Commission — are barred from donating to U.S. political committees.

Tens of millions of dollars of Bankman-Fried's donations may be at risk of being clawed back as bankruptcy lawyers look through the remains of his crypto empire in search of assets to repay creditors, according to Bloomberg.

The scale of Bankman-Fried's political donations is striking and will likely come under renewed scrutiny amid the new allegations.

Bankman-Fried was the second biggest Democrat donor (trailing only George Soros) and sixth biggest individual donor of the 2022 midterm elections, giving about $40 million to candidates and outside groups, according to

FTX, meanwhile, was the third largest contributor, with Bankman-Fried, co-CEO Ryan Salame and Director of Engineering Nishad Singh pouring $70 million into the midterms.

Bankman-Fried has insisted his contributions were benign and not meant to influence lawmakers or federal regulators. Critics have countered the money was meant to buy political clout.

Taking into account past elections, Bankman-Fried has donated more than $46 million in total, the vast majority of which has gone to Democrat candidates and liberal groups, according to data compiled by OpenSecrets. Salame gave $23 million, all to Republicans and conservative groups, while Singh contributed $14 million, all to Democrats and liberal groups.

Between the three, an estimated $57 million went to Democrat candidates and groups, while roughly $22 million went to Republican candidates and groups.

Bankman-Fried gave to a bevy of Democrats, from Sen. Dick Durbin (D-Ill.) to Rep. Ruben Gallego (D-Ariz.). His biggest donation by far this last election cycle was $27 million to Protect Our Future PAC, a Democrat group.

Plenty of Republicans also received his money, including Sens. Susan Collins (R-Maine) and Lisa Murkowski (R-Alaska). His biggest right-wing check was a $105,000 check to the Alabama Conservatives Fund. Salame, meanwhile, gave $2.5 million to the Senate Leadership Fund, which is connected to Senate Minority Leader Mitch McConnell (R-Ky.).

In 2020, Bankman-Fried gave more than $5 million to Joe Biden's presidential campaign and groups supporting Biden.

Amid this influx of cash, lawmakers were all too eager to embrace Bankman-Fried as a Washington power player, according to Rep. Bill Huizenga (R-Mich.).

"Everyone loved the exciting idea of a politically progressive, smart entrepreneur who was going to reimagine capitalism and change the world," Huizenga said Tuesday at a House Financial Services Committee hearing on FTX's collapse.

Bankman-Fried "wooed many in New York, Silicon Valley, around the world, and, yes, certainly here in D.C.," Huizenga said, adding that the fallen crypto mogul's lobbying approach left everyone "feeling better about themselves all while making them gobs of money."

An estimated one million FTX customers and investors are now facing combined losses worth billions of dollars due to alleged misuse of the money by company leadership. A recently filed court document showed FTX owes its 50 biggest creditors nearly $3.1 billion. The companies' total liabilities are estimated at more than $10 billion, against roughly $1 billion in assets, according to media reports and court documents.

Bankman-Fried spoke about his political donations in a recent interview.

"I donated to both parties," he said. "I donated about the same amount to both parties. All my Republican donations were dark. The reason was not for regulatory reasons. It's because reporters freak the f**k out if you donate to Republicans."

Following the collapse of FTX, many lawmakers have said they'll return the money from the crypto exchange or give it to charity. One Massachusetts Democrat, however, is keeping 2022 campaign donations totaling $5,800 (the legal limit for an individual to a single candidate) from Bankman-Fried and defending his decision, arguing the money was sent to other Democrats in more competitive elections ahead of last month's midterm elections.

"I'm not going to send money to a guy in a Bahaman jail, that's for sure," Rep. Jake Auchincloss, vice chair of the Financial Services Committee, told a Boston-based radio station this week. "That money is out the door, helping to elect Democrats, and we've seen already that under the leadership of Chairwoman [Rep. Maxine] Waters that Democrats on the Financial Services Committee have held bad actors to account across a range of industries."

Nine members of the committee — seven Democrats and two Republicans — received a collective total of over $300,000 in political contributions from Bankman-Fried and others at FTX, the Washington Free Beacon reported.

Waters, a California Democrat who's been pictured meeting with Bankman-Fried on multiple past occasions and appeared to blow him a kiss as he was leaving the Capitol building after testifying before Congress in December 2021, said recently she "didn't want to get into that" when asked if Democrats who received campaign cash from FTX should give it back.

Bankman-Fried's political donations — and what lawmakers did with them — will likely come under a brighter spotlight in coming days as the government pursues their prosecutions, which reportedly may yield additional charges.

Amid such scrutiny, Bankman-Fried has denied knowingly committing fraud. "I did not ever try to commit fraud on anyone," he recently told the New York Times, adding he "didn't knowingly commingle" FTX customer funds.

The disgraced crypto mogul also said earlier this month on ABC's "Good Morning America" that he had no knowledge of "any improper use of customer funds" but admitted to not spending time and effort trying to manage risk on FTX.

However, Bankman-Fried's successor, new FTX CEO John J. Ray III, said the cryptocurrency exchange's collapse was the result of "plain old embezzlement."

"This is just taking money from customers and using it for your own purpose," he testified to the House Financial Services Committee on Tuesday. "Not sophisticated at all. Sophisticated perhaps in the way they were able to hide it from people."

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