Former cryptocurrency billionaire Sam Bankman-Fried attempted to woo the Democrats through massive donations during the 2022 mid-election cycle.
His political action committee gave over $23 million to the Democratic Party, while the 30-year-old founder of now-bankrupt crypto broker FTX personally donated $13 million to both Democrats and Republicans.
Even Ryan Salame, who served as co-CEO of FTX Digital Markets and worked with Bankman-Fried, donated nearly $24 million to the Republican Party and over $12 million from his PAC.
Bankman-Fried’s donations to politicians cause Democrats headaches. Senators Elizabeth Warren and Dick Durbin, both Democrats, want documents from the bankrupt company’s founder to prove the company’s collapse.
Legislators require “complete and transparent accounting” of the operations of FTX and its hedge fund Alameda Research.
“New revelations continue to shed light on a seemingly appalling 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 is overseeing the bankruptcy proceedings.
Bankman-Fried, also known as “SBF,” is being asked to provide the accounts of FTX and its subsidiaries, said Warren and Durbin, the Senate No. 2 Democrat and chairman of the Judiciary Committee.
Both senators are critical of the crypto industry, saying the exchange’s operations are “troubling allegations… about the company’s fraudulent and illegal practices.”
FTX has been accused of misusing client funds when it filled orders for its clients, took their cash and bought cryptocurrencies on their behalf. FTX acted as a custodian and held clients’ cryptocurrencies in custody.
The company leveraged its clients’ crypto assets through its sister company Alameda Research’s trading arm to generate cash through borrowing or market making. FTX’s borrowed money was used to bail out other crypto institutions in the summer of 2022.
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 Senators seeks answers about the transfers between FTX and Alameda Research
“Billions of dollars worth of investor funds appear to have vanished into the ether,” Warren and Durbin wrote. “These massive losses raise questions about the behavior of” Bankman-Fried and the company’s executives.
The House Financial Services Committee on Nov. 16 said it would hold a hearing in December to investigate FTX’s meltdown and expects Bankman-Fried to tesitfy.
The senators said Bankman-Fried must file the documents by Nov. 28, which include “full copies of all” balance sheets of FTX and its subsidiaries from 2019 to 2022.
But the documentation that Democrats want may not even exist.
John Ray, who is responsible for restructuring FTX, gave a scathing description in a 30-page document filed with the United States Bankruptcy Court for the District of Delaware and released Nov. 17.
He described a company whose practices seem surreal and break with all conventional business practices.
“Never in my career have I seen such a complete failure of corporate controls and a complete lack of trustworthy financial information,” Ray wrote. “From the compromised system integrity and flawed regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, inexperienced and potentially vulnerable individuals, this situation is unprecedented.”
Ray was the liquidator of Enron, the brokerage whose collapse is one of the greatest financial fiascos of modern times.
Bankman-Fried viewed the funds from one of his firms as his personal bank. Employees used company funds to buy homes in the Bahamas, and none of these transactions were recorded anywhere.
There may even have been fictitious employees. The board, charged with controlling everyone’s instincts and behavior, never met.
The regime of Bankman-Fried and his two allies – Zixiao “Gary” Wang and Nishad Singh – failed on several levels.
“Many of the FTX Group companies, particularly those organized in Antigua and the Bahamas, did not have adequate corporate governance. I understand that many companies, for example, have never held board meetings,” Ray said 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 heavily, whom it accuses of not paying enough taxes. Her criticism of Musk increased tenfold after the world’s richest man announced he would vote Republican in the midterm elections.
“Bernie Madoff from Crypto”
Now he, FTX and Alameda Research are under criminal investigation by the Justice Department and the US Securities and Exchange Commission.
Despite being dubbed the “Bernie Madoff of crypto,” Bankman-Fried continues to seek attention by tweeting his concerns about financial regulators and speaking to a reporter at Vox.
His attempts to control the narrative could only provide more evidence to regulators as the company enters the bankruptcy proceedings that began when he filed for Chapter 11 protection on Nov. 11.
Bankman-Fried despises regulators, which his critics might find ironic.
He has been seeking backers, although it appears the money hundreds of thousands of customers have invested in the platform is unlikely to be repaid even if the company’s assets are sold.
Bankman-Fried sent several direct messages via Twitter to Kelsey Piper, a reporter at Vox who first met him on Zoom over the summer when she wrote a profile about him.
Piper reached out to him via Twitter on Nov. 13, and he responded by mocking regulators by saying, “F—regulators.”
He had never criticized them before, unlike his main rival Changpeng Zhao, the founder of Binance, who tried to save the company by buying it but quickly went out of business less than 24 hours later.
In another irony, Bankman-Fried had spent time in Washington lobbying for more regulation on crypto, which are digital assets that have garnered market cap and attention from retail investors.