The Mysterious Problem With Sam Bankman-Fried’s Political Donations

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When Justice Department prosecutors unsealed an indictment against FTX founder Sam Bankman-Fried on Tuesday morning, they revealed an array of serious charges against the crypto boy-king for billions of dollars in high-profile financial crimes, but the very last count opens a new mystery—an enigmatic straw donor scheme to violate federal campaign finance laws.

During a press conference unveiling the charges, U.S. Attorney Damian Williams alleged that Bankman-Fried, 30, parlayed “tens of millions of dollars” stolen from his clients into a side career as one of the most prolific political financiers in the country.

“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,” Williams said.

While the details of the scheme are still unknown to the public, prosecutors have made some clear allegations in the wake of Bankman-Fried’s arrest earlier this week by Bahamian officials.

Specifically, according to the indictment, Bankman-Fried, acting in concert with multiple unnamed co-conspirators, violated “prohibitions applicable to corporate contributions and conduit contributions,” and deprived the Federal Election Commission of its ability to properly disclose donor information to the public in compliance with federal election law.

Those laws require campaigns and political committees to publicly disclose the names of their donors, and they also put caps on how much money individuals can give to a group. Sometimes, however, donors seek to get around those rules by giving money in someone else’s name. Known as a “straw donor” scheme, it’s one of the few campaign finance crimes that can carry prison time.

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According to Williams, millions of dollars in FTX-related donations were “disguised to look like they were coming from wealthy co-conspirators when, in fact, the contributions were funded by Alameda Research with stolen customer money,” referring to Bankman-Fried’s crypto hedge fund.

A conviction would position bankruptcy lawyers to reclaim as much as $73 million in known FTX-tied political contributions, with three people telling NBC News there was even more given to “dark money” groups.

Brendan Fischer, deputy executive director of the government watchdog group Documented, called it a “massive bipartisan campaign finance scandal” that highlights problems with transparency rules.

“The problem is that it is way too easy to pour dark money into politics. Citizens United opened new avenues for secret political spending, and Congress and the FEC have refused to close them,” Fischer said.

While some details are still unclear, Fischer said, it appears Bankman-Fried got caught in this scheme because unrelated investigations into FTX’s business practices revealed “a slew” of campaign finance violations.

“Megadonors who aren’t engaged in illegal business activities might escape scrutiny for similar dark money political giving,” Fischer said.

The allegations also get at the heart of a question about Bankman-Fried’s donations generally—which party he backed, and how, as prosecutors suggest, he hid his Republican support.

Bankman-Fried, or “SBF” as he’s commonly known, was widely understood to be a Democratic supporter. He put his name on nearly $40 million in personal political donations, with almost all of it going to Democrats, according to Federal Election Commission records. Those contributions placed him among the largest megadonors in the country, styling SBF as an aspiring George Soros—and, eventually, putting pressure on Democrats to return the money after FTX’s spectacular collapse last month.

Republicans seized on the donations to paint Democrats as corrupt, with some conservatives even pushing a nonsensical conspiracy theory that SBF was laundering financial aid for Ukraine back into Democratic pockets.

“So, he bought the Senate for the Democrats,” Fox News host Jesse Watters mused last month, adding, “If this guy was a Republican donor he’d probably be sitting in solitary confinement right now.”

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But the partisan allegations were quickly complicated by the fact that SBF’s colleague, fellow FTX executive Ryan Salame, had given nearly identical amounts to GOP candidates and groups.

As it turned out, neither SBF nor his partners were simply in the tank for a certain party. At least when it came to money, SBF was a politically agnostic businessman who wanted to curry favor with whoever was in power—just as long as his public image wasn’t associated with Republican donations.

SBF has, remarkably, spoken openly about this possibly illegal donation strategy, where the embattled CEO admitted he had given “about the same amount” of money to both Democrats and Republicans.

In an interview with crypto journalist Tiffany Fong, which she recorded previously but posted this week, Bankman-Fried said he “made all the Republican ones dark.”

“Reporters freak the fuck out if you donate to a Republican,” he said. “They’re all secretly liberal and I didn’t want to have that fight.”

And so, while SBF and his colleagues, in their quest for political influence, followed the tried-and-true D.C. lobbying tradition of showering their wealth on both sides of the aisle, the CEO reportedly took steps to publicly distance himself from his Republican donations, including through “dark money” organizations.

(Bankman-Fried’s political spending adviser, Paula Dukes, who reportedly helped craft this plan, declined to comment for this article.)

Now, it appears that DOJ prosecutors, along with investigators at the Securities and Exchange Commission, believe the allegedly illegal donations to Democrats and Republicans all came from the same pool of money—funds purloined via wire fraud from FTX customers and washed to campaigns and political groups under the names of company officials.

Fischer explained that while Bankman-Fried disclosed contributions that “supported the altruistic image he sought to construct,” he was “secretly making other donations to buy political influence without the public’s knowledge.”

“That’s not how it’s supposed to work—the public has a right to know who is spending millions of dollars trying to influence our vote and our political system,” Fischer said. “Transparency is a cornerstone of campaign finance law. Wealthy donors aren't supposed to be able to pick and choose which of their big contributions are public, and which ones are secret.”

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Another watchdog, Citizens for Responsibility and Ethics in Washington (CREW), appears to have seen it coming. Ahead of Tuesday’s indictment, the group had already filed a complaint with the FEC, based on Bankman-Fried’s claims about giving “dark.” Those public statements, according to the CREW complaint, suggested that SBF had incriminated himself.

CREW communications director Jordan Libowitz told The Daily Beast that while these are “serious charges,” details about the scheme are still shaking out.

“Clearly he meant it as a way to get around disclosure laws, but we don’t know right now whether he meant he gave the money to actual ‘dark money’ nonprofit groups, or whether he was using the phrase as a term of art about concealing his name generally,” Libowitz said.

Libowitz explained that when wealthy people write checks to “dark money” organizations like 501(c)(4) nonprofits, which don’t have to release donor information, it’s frequently done with “a wink and nod to get around the law”—not being overtly political, but saying the nonprofit can use the money however they want.

“But if you’re tabbing it specifically for politics as a way to hide your name, then that becomes a legal issue,” Libowitz said, adding that if the nonprofit was found complicit in the scheme, the group could jeopardize its standing with the IRS.

It’s not currently clear whether SBF or any associates donated directly to any specific dark money organizations, though NBC News reported last month that there was “much more” in those gifts.

“The thing is, who are all the groups benefiting from this money?” Libowitz wondered. “FTX really had a political agenda, pushing pro-crypto and anti-regulation people in general as a business move and not an ideological one.”

Libowitz noted the pressure on politicians to return SBF’s contributions, but pointed out that, thanks to legal limits, those direct contributions are “fairly minor” compared to what he gave to PACs and super PACs. (Super PACs associated with SBF and Salame spent heavily this cycle—Bankman-Fried’s group put more than $23 million behind Democrats, and Salame’s spent over $12 million backing Republicans, according to FEC records.) And those amounts themselves might be fairly minor compared to what SBF gave dark money groups, which can accept unlimited amounts of money.

“So if every politician gave back every direct donation, that’s still a very small portion of his political spending,” Libowitz said. “It’ll be interesting to see how these bigger groups react.”

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Fischer pointed out that if a political committee discovers that a contribution was illegal, FEC regulations require the group to disgorge the money within 30 days. If the true donor is identifiable, the contribution can be refunded to the original contributor or to the U.S. Treasury.

At least one nonprofit has publicly recognized a sizable contribution—the Campaign Legal Center, a watchdog that, ironically, advocates for greater transparency in political financing, and which received $2.5 million from SBF last year.

CLC spokesperson Brendan Quinn acknowledged the gift, saying in a statement to The Daily Beast that his organization has “a thorough vetting process before accepting significant funding from any entity or individual,” and posts all donor names to its website.

“We applaud and commend the U.S. attorney’s office for their investigation into Bankman-Fried,” Quinn said, adding that if the charges bear out, SBF’s conduct would be “completely contrary to our organizational mission.”

CLC said last week that it could not return the money, because it had already been spent. But Quinn appeared to soften that position after the arrest.

“Usually, political campaigns disgorge questionable funds to a charity. CLC is a charity and contributions made to our organization go to upholding American democracy,” Quinn’s statement said. “However, given that this donor’s alleged actions, as described in [the] indictment, would be in direct conflict with our mission, we are currently exploring our options on how to proceed in these circumstances.”

Read more at The Daily Beast.

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