Former cryptocurrency billionaire Sam Bankman-Fried tried to win favor with Democrats during the 2022 midterm election cycle by making huge donations.
His political action committee donated more than $23 million to the Democratic Party, while the 30-year-old founder of the now-insolvent crypto brokerage FTX personally donated $13 million to both Democrats and Republicans.
Even Ryan Salame, who was co-CEO of FTX Digital Markets and worked with Bankman-Fried, donated nearly $24 million to the Republican Party and more than $12 million from his PAC.
Bankman-Fried’s donations to politicians are a headache for Democrats. Senators Elizabeth Warren and Dick Durbin, both Democrats, want documentation from the founder of the bankrupt company to prove the company’s collapse.
Lawmakers are calling for “complete and transparent accounting” of the business dealings of FTX and its hedge fund, Alameda Research.
“New revelations continue to shed light on what now appears to be a horrendous case of greed and deceit,” Warren and Durbin wrote in the letter to Bankman-Fried and FTX’s new CEO John J. Ray III, who oversees the bankruptcy proceedings.
Bankman-Fried, aka “SBF,” is being asked to turn over the balance sheets of FTX and its subsidiaries, said Warren and Durbin, the No. 2 Senate Democrat and chairman of the Judiciary Committee.
Both senators are critical of the crypto industry, saying the exchange’s operations are “disturbing allegations…about the company’s fraudulent and illicit practices.”
It is alleged that FTX misused clients’ funds while executing orders for their clients, withdrawing their funds and purchasing cryptocurrencies on their behalf. FTX acted as a custodian and held the clients’ cryptocurrencies.
The company used its clients’ crypto assets, through its sister company’s Alameda Research trading arm, to generate money through loans or market making. The money borrowed from FTX was used in the summer of 2022 to bail out other crypto institutions.
Now both Bankman-Fried and Alameda Research are under criminal investigation by the Justice Department and the US Securities and Exchange Commission.
A letter from the Senators seeks answers to the transfers between FTX and Alameda Research
“Billions of dollars in investor funds appear to have vanished into the ether,” Warren and Durbin wrote. These huge losses raise questions about the conduct of Bankman-Fried and the company’s executives.
The House Financial Services Committee said on Nov. 16 that it will hold a hearing in December to investigate the collapse of FTX and expects Bankman-Fried to testify.
The senators said Bankman-Fried must submit the documents by Nov. 28, which include “complete copies of all” balance sheets of FTX and its subsidiaries from 2019 to 2022.
But the documentation the Democrats want may not even exist.
John Ray, who is responsible for restructuring FTX, provided a scathing description in a 30-page document filed Nov. 17 in the United States Bankruptcy Court for the District of Delaware.
He described a company whose practices seem surreal and violate all conventional business practices.
“Never in my career have I seen such a complete failure of corporate controls and such a complete absence of reliable financial information as here,” Ray wrote. “From compromised system integrity and deficient regulatory oversight abroad to the concentration of control in the hands of a very small group of inexperienced, inexperienced and potentially compromised individuals, this situation is unprecedented.”
Ray was the liquidator of Enron, the broker whose collapse remains one of the greatest financial fiascos of modern times.
Bankman-Fried considered the funds of one of his companies his personal bank. Employees dipped into company money to buy homes in the Bahamas, and none of these transactions were recorded anywhere.
There may even have been fictitious employees. The board of directors, which is supposed to rein in everyone’s instincts and behavior, has never met.
The regime of Bankman-Fried and his two associates – Zixiao “Gary” Wang and Nishad Singh – failed on several levels.
“Many of the companies in the FTX Group, especially those organized in Antigua and the Bahamas, did not have proper corporate governance in place. I understand that many entities have never had board meetings, for example,” Ray complained in the court filings.
The Democrats have been criticized by another famous billionaire, Elon Musk, who runs Twitter and Tesla.
The party is trying to tax the rich more, who they accuse of not paying enough taxes. Their criticism of Musk increased tenfold after the world’s richest man announced he would vote Republican in the midterm elections.
Crypto’s Bernie Madoff
Now he, FTX and Alameda Research are under criminal investigation by the Department of Justice and the US Securities and Exchange Commission.
Although Bankman-Fried has been called the “Bernie Madoff of crypto,” he continues to attract attention by tweeting his concerns about financial regulators and speaking to a reporter at Vox.
His efforts to contain the story can only provide more evidence to regulators as the company goes through the bankruptcy process initiated when he filed for Chapter 11 protection on Nov. 11.
Bankman-Fried detests regulators, which his critics may find ironic.
He has sought supporters, even though it appears that the money hundreds of thousands of customers are pouring into the platform is unlikely to be recouped, even if the company’s assets are sold.
Bankman-Fried sent several direct messages via Twitter to Kelsey Piper, a reporter at Vox, who had initially met him over Zoom over the summer when she wrote a profile about him.
Piper reached out to him on Twitter on Nov. 13, and he responded by taunting regulators, saying “F—regulators.”
He had never criticized them before, unlike his main rival, Changpeng Zhao, the founder of Binance, who had tried to save the company by taking over but quickly backed out of the deal less than 24 hours later.
In another ironic twist, Bankman-Fried had spent time in Washington lobbying for more regulation of crypto, which are digital assets that have gained market cap and attention from private investors.