Even before the spectacular collapse of the major cryptocurrency trading platform FTX last week, Republicans and Democrats were going to be in an awkward position regulating the industry, given the tens of millions of dollars many lawmakers took from FTX’s CEO, Sam Bankman-Fried, and his top lieutenant Ryan Salame.
But after FTX folded—and with Bankman-Fried put “under supervision” by authorities in the Bahamas for potential fraud charges—lawmakers are in an even more uncomfortable position as they face a dreaded question in politics: Will you give the money back?
In the 2022 election cycle alone, Bankman-Fried personally gave more than $13 million to dozens of candidates and campaign organizations of both parties. While the vast majority of the CEO’s donations were to Democrats, Salame gave nearly $24 million to Republicans. Outside PACs associated with the two also spent heavily: Bankman-Fried’s PAC spent over $23 million supporting Democrats, while Salame’s PAC spent over $12 million for Republicans.
ADVERTISEMENT
On its own, that sort of money is enough to raise questions about the relationship between congressional watchdogs and the donors who fund their campaigns. But for recipients of FTX cash, their uncomfortable position got immensely more so last week when users couldn’t withdraw their money from the company’s platform and it filed for bankruptcy. The Department of Justice and the Securities and Exchange Commission are now investigating whether FTX used customer money as backstop funding for their separate investment company.
For this story, The Daily Beast contacted 26 current and incoming Democratic and Republican lawmakers—party leaders, members of committees with jurisdiction over crypto, or candidates who received outsized support from FTX-linked organizations—to ask if they would keep their campaign contributions.
Two recipients of Bankman-Fried’s campaign cash, Sen. Dick Durbin (D-IL) and Rep. Chuy Garcia (D-IL), confirmed to The Daily Beast that they would donate the $2,900 they received from him to charities. Rep. David Schweikert (R-AZ), who took $2,900 from Salame, told The Daily Beast that he would relinquish the funds as well.
“If the person who made an individual contribution engaged in bad acts, yeah, absolutely,” Schweikert said of returning the donations.
And Sen. Kirsten Gillibrand's office told The Daily Beast after publication that the New York Democrat was "donating the funds to Ariva, Inc., a Bronx-based nonprofit that aims to promote individual wealth and economic development in low-to-moderate income communities."
Rep. Ruben Gallego (D-AZ) said he spent money given to him by Bankman-Fried to drive turnout for Andrea Salinas, a Latina running for Congress in Oregon—whom Bankman-Fried spent millions to defeat during the district’s Democratic primary.
“So, I think I’ve paid it back,” Gallego said.
Some lawmakers did not want to engage with the question at all. On Monday night in the Capitol, The Daily Beast encountered Reps. Lucy McBath (D-GA) and Salud Carbajal (D-CA), who took $2,900 and $5,800 respectively from Bankman-Fried. When asked whether she would return the donation, McBath remained silent as her communications director insisted that she couldn’t answer questions while walking to the House floor. When asked the same question as he walked with McBath, Carbajal said The Daily Beast should “feel free to call my office.”
Every other office The Daily Beast reached out to either did not respond or declined to respond.
While it’s common to see calls for political figures to donate campaign cash from figures embroiled in scandal or legal issues, like with the disgraced film mogul Harvey Weinstein, it’s rare to see the integrity of the cash itself come into question. The fact that FTX could very well face hearings and investigations conducted by beneficiaries of its campaign largesse only adds to the potential pressure.
Some members had been wary of FTX’s cash and influence from the get-go—including one who found herself on the other side of Bankman-Fried’s spending onslaught. After Rep. Carolyn Bourdeaux (D-GA) was drawn into the same suburban Atlanta district as McBath, Bankman-Fried’s Protect Our Future PAC spent $1.9 million on ads boosting McBath in the primary.
“I knew that this was a very risky financial instrument, and these guys were likely to come to a bad end,” Bourdeaux told The Daily Beast. “Early on, I called for Lucy to disavow this funding. She had no control over it, but she could have at least said, this is not appropriate.”
McBath did not, and for Bourdeaux—who was defeated in the May primary—there are mixed emotions in watching the total unraveling of Bankman-Fried’s company spark questions about the origin of the money that was spent to boost her opponent. (McBath not only declined to answer questions Monday night on her way to votes, she also remained silent when The Daily Beast encountered her again after votes. Her office also did not respond to a request for comment.)
Asked what she expects in the way of response of those who benefited from FTX’s cash, Bourdeaux said she’d like to see “some serious oversight, and for them to lean in on making sure we regulate this industry appropriately.”
Bankman-Fried and FTX also did not respond to requests for comment for this story.
While cryptocurrency has surged in popularity, it’s largely managed to evade regulation, even as government agencies like the SEC pleaded with Congress for more control. FTX isn’t the first crypto collapse where buyers have lost heaps of cash. Popular investments like Bitcoin and Dogecoin have proven extremely volatile, especially as crypto became more accessible through trading apps like Robinhood.
This newly elected Congress is set to face the most pressure yet to develop policy regulating cryptocurrency and blockchain technologies. Not only will many incoming lawmakers who have benefited from crypto donations be in a position to steer investigations into FTX, some may have the power to shape new federal regulations governing the industry.
Of course, these sorts of conflicts of interest aren’t unusual in Congress. As Jordan Libowitz, communications director for the watchdog group Citizens for Responsibility and Ethics in Washington, told The Daily Beast, “It’s the cost of business and the way things are done in our system. Any industry, any company is giving money and lobbying the members of Congress that have oversight over that company.”
But it’s still well within historical precedent for lawmakers to offload crooked cash toward some altruistic cause.
Libowitz pointed out that lawmakers can often be short on cash after the election. But for incumbents, he said, “what we usually see in these kinds of things is a couple of thousand dollars is not worth the bad story to be associated with these guys.”
Of course, the majority of Bankman-Fried and Salame’s giving was to campaign committees, which don’t face the same pressure to return the millions of dollars they received, given that they do not play a role in oversight or policymaking for the industry.
In extensive press coverage of his emergence as a major political player, Bankman-Fried’s giving was often framed as an extension of his belief in “effective altruism,” a social philosophy that seeks to maximize the benefits of philanthropy. Effective altruists, many of whom are in the tech sector, have subscribed to the idea that spending heavily to prevent the next pandemic is the most effective way to make a positive impact.
Much of Bankman-Fried’s contributions, particularly through his Protect Our Future PAC, went to candidates who he supposedly thought would be champions for “pandemic preparedness.”
In one instance, Protect Our Future spent $10 million to boost Carrick Flynn, an effective altruist with crypto industry connections, in a crowded Democratic primary for a left-leaning House district in Oregon. In a highly unusual move, House Democrats’ largest outside super PAC—which typically avoids involvement in primaries—spent to boost Flynn.
The move caused a remarkable degree of backlash to Bankman-Fried among Democrats, who wondered why so much money was being spent for Flynn—and from the PAC aligned with Speaker Nancy Pelosi—particularly when there were experienced women running for the seat. Flynn lost the primary to Salinas, the candidate Gallego says he spent FTX money to boost in the general election, which she won last week.
Since FTX’s collapse, right-wing media and politicians have sought to make a scandal out of Bankman-Fried’s prolific giving to Democrats. But he also personally gave generously to Republicans, contributing over $44,000 to the National Republican Congressional Committee this cycle. The NRCC’s chair happens to be Rep. Tom Emmer (R-MN), a vocal crypto booster who has also taken cash from Salame.
Whatever his purported focus on pandemic preparedness, records also show that Bankman-Fried’s political giving was strategically attentive to his own personal business interests.
Among those who received donations from Bankman-Fried, many are members of party leadership or serve on committees with jurisdiction over cryptocurrency policy.
In the House, he gave to two likely future leaders of the Democratic caucus: Reps. Hakeem Jeffries (D-NY) and Pete Aguilar (D-CA). He also gave $2,900, or the $5,800 per election maximum, to several members of the House Financial Services Committee: Reps. Garcia (D-IL), Ritchie Torres (D-NY), Josh Gottheimer (D-NJ), and Jake Auchincloss (D-MA).
In the Senate, Bankman-Fried donated thousands to the leaders of the Senate Agriculture Committee, Sens. Debbie Stabenow (D-MI) and John Boozman (R-AR), which is considering a crypto regulation bill he supports. He also gave to Durbin, Tina Smith (D-MN), and Kristen Gillibrand (D-NY)—all of whom serve on the Senate Agriculture and/or Banking Committees.
Bankman-Fried’s PAC also spent largely to support incoming freshman Democrats who had contested primaries, such as Reps.-elect Jasmine Crockett (D-TX) and Valerie Foushee (D-NC), in the name of pandemic preparedness.
Others saw different motivations at work. “Clearly, Sam was trying to really burnish his image, and be this political kingmaker,” Bourdeaux said.
Rep. Maxine Waters (D-CA), the chair of the House Financial Services Committee, said last week that the FTX collapse is another reason why legislation is needed to regulate crypto. But on Monday, Waters said she doesn’t think lawmakers taking FTX money puts them in an awkward position during the company’s fallout, because members of both parties were recipients.
“It’s unfortunate because it just puts a bad eye on cryptocurrency. And so we’ll see what happens,” she said.
House Ways and Means Chairman Richard Neal (D-MA), which has jurisdiction over the nation’s tax policies, said the crypto industry had parallels to the Savings and Loan crisis of the 1980s in the sense that both industries just didn’t want to have regulation.
“I came here for the solution to the S&L issue,” Neal said. “I wasn’t here to create the problem. And the problem was deregulation.”
He continued that this was such a new industry that he and most members of Congress haven’t been able to grasp the issues in front of them. “I mean, what was the collateral?” Neal asked of FTX, which was able to secure a number of loans by presenting coins as assets that, had they tried to unload them on the open market, would have significantly devalued the coin.
Ultimately, when FTX faced a run on withdrawals, the platform didn’t have the money—and Bankman-Fried is alleged to have actually taken money from user accounts to make other risky crypto investments.
The entire episode has shattered Bankman-Fried’s once-solid, if not curious, reputation with lawmakers.
Bankman-Fried’s FTX colleague, Salame, was also a conduit for donations largely to the GOP side, reflecting a divide-and-conquer tactic to political giving that is common in corporate America. Salame personally gave to Emmer and Rep. Alex Mooney (R-WV), both of whom sit on the Financial Services panel.
Salame’s own PAC, American Dream Federal Action, was also a heavy spender in GOP primaries, much the same way that Protect Our Future was for Democrats. The PAC spent nearly $2 million to help Sen.-elect Katie Boyd Britt win a GOP primary in Alabama, $1.2 million to help Boozman through a primary, and $500,000 to help Sen.-elect Ted Budd in North Carolina. Salame also personally gave to Britt and Budd.
Despite the fact that many powerful lawmakers were boosted in their campaigns by FTX, even critics like Bourdeaux believe that the Bankman-Fried and his lieutenants will not get a free pass.
“The horse is out of the barn,” she said. “The fraud is so obvious, what happened is so egregious, that it’s going to be very hard for members to say, we shouldn’t intervene to regulate this sector.”
For now, the first question is whether Democrats who took donations from Bankman-Fried should give that money back. And for Democrats who didn’t take money any money from him, the answer is obvious.
“Yeah, probably,” Rep. Ro Khanna (D-CA) said.
Matt Fuller contributed to this report.
