The stench of a scandal involving crypto billionaire Sam Bankman-Fried is creating a stink for powerful Washington politicians. The beleaguered owner of cryptocurrency exchange FTX has been a mega-donor to the Democratic Party for years, pledging $1 billion in funding during the recent midterms.
Democrats are rushing to return millions of dollars in donations to avoid the offensive whiff of ties with the bankruptcy of Bankman-Fried's crypto currency trading platform. The 30-year-old crypto kingpin stepped down from FTX after its collapse. He's currently holed up in his penthouse in the Bahamas.
Unsuccessful Texas gubernatorial candidate Beto O'Rouke is giving back $1 million, joining Democrats Sen. Kristen Gillibrand (NY), Rep. Durbin (lIlinois) , Rep. Chuy Garcia (AZ), Rep. Lucy McBath (GA), Salud Carbajal (CA) and a host of other red-faced Congressional members scurrying for cover.
Although the mercurial billionaire bankrolled mostly Democrats, he tried to leverage two Republicans on the Senate Agriculture Committee as part of his lobbying effort to put the Commodity Futures Trading Commission in charge of crypto regulation. They each received $5,800.
All those dollar signs are just a trickle of the gusher of cash that was unleashed by the crypto fraudster. The majority of Bankman-Fried's largess was showered on Democrat campaign committees and so-called dark money organizations. That money will never be returned.
The political stampede began after Bahamian-based FTX filed for bankruptcy, sending shivers through the crypto industry and unnerving anxious investors. A company document showed FTX has less than $1 billion in liquid assets and nearly $9 billion in liabilities. The company listed 100,000 creditors.
Questions are also swirling around the handling of customer funds at Alameda Research, a trading firm 90% owned by Bankman-Fried. Money allegedly was funneled from FTX to the trading outfit, disappearing into a black hole that investigators are trying to untangle.
The epic crash of FTX conjured up similarities with the Bernie Madoff scandal. Embarrassed U.S. regulators claimed there was no resemblance. However, like Madoff, Bankman-Fried was hailed as a financial genius and philanthropic champion with powerful friends in Washington.
Bankman-Fried shoveled money like crop fertilizer throughout the halls of Washington, gaining access to top federal officials. The crypto magnate donated $5.2 million to President Biden's 2020 campaign, according to OpenSecrets. That cash opened doors to top administration officials.
Official records show Bankman-Fried visited the White House in June, where he made his $1 billion pledge, which he later reneged on. The entrepreneur met with the White House counselor Steve Ricchetti in April and May, according to White House logs. Ricchetti is a top Biden advisor.
He powwowed with Charolette Butash, a policy advisor to the White House deputy chief of staff. At the time, FTX was lobbying Congress to shape crypto regulation. Crypto currency watchdog, Consumer Choice Center, warned that Bankman-Fried wanted to use regulation to strangle smaller competitors.
Eight months before Bankman-Fried's empire crumbled, he joined s video call with top financial regulator Gary Gensler, according to The New York Times. The former chief executive was seeking approval for exemption from the threat of fines for securities violations by cryptocurrency firms.
Gensler is the current chair of the Securities and Exchange Commission (SEC), which regulates the securities industry and protects investors. He was appointed to this position by President Biden in 2021. Now Gensler is under fire for his agency's lack of oversight of the cryptocurrency industry.
Money buys influence in Washington and no one used that lever better than Bankman-Fried. The disgraced financier doled out $39.8 million in the midterms, all but $989,856 going to Democrats. He was the sixth largest midterm election donor, only dwarfed by George Soros' $128.4 million.
Bankman-Fried doled out $6 million on the Democrat House Majority PAC. He shelled out $28 million to the Protect Our Future PAC in an effort to ingratiate himself with lawmakers weighing crypto regulations, according to an article in Politico.
Bankman-Fried, FTX co-CEO Ryan Salane and Director of Engineering Nishad Singh collectively poured $70.1 million in the mid-terms, a staggering sum of money. The amount is ten times more than FTX contributed in the 2020 presidential election, reports OpenSecrets.
The list of Bankman-Fried's PAC donations stretch for two pages on the website for OpenSecrets, which uses filings with the Federal Elections Commission to compile its data. Follow the money if you want to know who carries political clout in Washington.
The question is how long will Joe Biden's Department of Justice and SEC dither until they charge Bankman-Fried? When will he be expedited? Bankman-Fried apparently isn't worried. He is making the media rounds, trying to restore his shattered reputation while apologizing for the FTX implosion.
Investors want justice. But Bankman-Fried paid for political protection and influence. Washington politicians never eat their benefactors. That's why no one should expect a full investigation of Bankman-Fired's efforts to buy influence with Democrats and the administration.
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