Uh… what’s going to happen to all that money that Sam Bankman-Fried gave to politicians?

Sam Bankman Fried was arrested last week in the Bahamas on eight separate criminal charges. He was indicted by the Justice Department’s Southern District of New York on charges including wire fraud, securities fraud, conspiracy to commit fraud, money laundering and campaign finance violations.

The first seven charges look more pressing to investors in bankrupt Bankman-Fried cryptocurrency exchange FTX, as well as to clients hoping to get their money back; The latter is the main concern of politicians in Washington.

Bankman-Fried is known to have been a major donor during the 2022 election cycle, giving nearly $40 million to predominantly Democratic candidates (later claiming to have given the same amount to Republicans through dark money entities; his partner Ryan Salameh gave $25 million to Republicans) . The Justice Department now alleges that Bankman-Fried and the “cooperating co-conspirators” made illicit campaign donations worth “tens of millions of dollars.”

The federal government alleges serious campaign finance law violations, which could result in significant prison sentences on their part. First, they claim that Bankman-Fried violated the straw donor ban by making donations “in other people’s names.” The documents also claim that because Bankman-Fried was using FTX funds to make personal donations, it also violated a ban on corporate contributions. The Campaign Finance Act prohibits campaigns from taking money directly from corporations.

The first part is bad news for Bankman Fried. It was straw donor law violations — which are among the most serious campaign finance violations — that brought notorious scammers Lev Parnas and Igor Froman, as well as arch-right-wing commentator and conspiracy theorist Dinesh D’Souza, to a chokehold. Part two is bad news for the Democrats.

The Department of Justice now alleges that Bankman-Fried and his “conspiratorial co-conspirators” made illegal campaign donations worth “tens of millions of dollars.” dollars. “

Shipping documents from the Securities and Exchange Commission allege that Bankman-Fried “improperly transferred clients’ assets to its hedge fund, Alameda Research LLC (“Alameda”), and then used those clients’ funds to make undisclosed investments, generous real estate purchases and donations. big political. In more plain English, Bankman-Fried is accused of stealing client funds from FTX and using enhanced corporate funds to donate to politicians of his choosing. And while the multimillion-dollar contributions via the PAC, Protect Our Future, made most of the headlines during the election season in their staggering amounts, Bankman-Fried’s personal giving also appears to have been in the crosshairs of the federal government’s stance.

said Brendan Fisher, deputy executive director at Documented, an investigative watchdog group.

And that personal bounty has been showered with Democrats all over Washington, including and in particular the Democrats’ new leadership class. For example, Bankman-Fried gave the largest amount he could to House freshman Democrat Hakeem Jeffries, as did his brother Gabe Bankman-Fried. Sam Bankman-Fried has also maxed out Democratic Congressional Campaign Committee Chairman Sean Patrick Maloney and Sen. Kirsten Gillibrand, and donated to her own political action committee. And donate to Rep. Richie Torres, too. This is only in New York. He also maxed out House New Democratic Caucus Chairman Pete Aguilar of California, who is the third most powerful Democrat in the House.

He also gave to the Democrats’ House and Senate campaign PACs, including $5,000 to Team Blue PAC, the political action committee Jeffries founded. FEC filings show three donations to the Democratic Congressional Campaign Committee, the most important campaign arm of House Democrats, totaling $250,000. He repeatedly gave to the Senate Democratic Campaign Committee, his Senate equivalent, $1 million for the Senate Majority PAC, the neighboring PAC. Bankman-Fried’s PAC Protect Our Future has awarded $6 million to the House Democrats’ majority party as well. (To be clear, Republicans also got in on the action here, with National Republican Campaign Committee Susan Collins, and other prominent GOP members also from Bankman-Fried.)

Did all this money come from FTX client accounts? Well, we don’t know yet, and that’s the problem. “It’s going to be hard for prosecutors to figure that out,” Fisher said. “But what they are saying is that part of the contributions were made using clients’ money.”

Even worse, these donations could be sought in FTX’s bankruptcy proceedings, which are still ongoing. As Bloomberg recently reported, “at least $73 million in political donations associated with Sam Bankman-Fried’s FTX may be at risk of being refunded.” That number appears to include all of his personal giving along with what came from his super PAC, as well as the contributions of his top Republican aides (more on that in a moment).

Politicians should put money aside with the expectation that Sam Bankman-Fried donations will return to bankruptcy. court.

Some Democrats have already recognized the responsibility these donations represent, and are starting to offer their own. Sen. Debbie Stabenow, a Michigan Democrat who received $26,600 all from Bankman-Fried, said she plans to donate the money to a local charity. Congressman-elect Maxwell Frost, just weeks after being formally sworn in as the youngest member of the House, has just announce He also would donate the Bankman-Fried money he received to charity. Several of the aforementioned Democrats, including Jeffries, Aguilar, Gillibrand, and Torres, donated or said they plan to do so as well.

But not all Democrats are whistling to the same tune. In a recent interview, Rep. Jake Auchincloss of Massachusetts dismissed the idea of ​​turning over the money he got from Bankman Fried. Auchincloss was one of eight members of Congress to sign a letter in March calling on the Securities and Exchange Commission to retract its investigation into crypto companies including FTX. I wouldn’t send money to a guy sitting in [Bahamian] he said in a recent interview. “This money is out the door.”

He is right that much of the money Bankman-Fried gave politicians has already been spent.

Many Democrats are now stuck between some ugly choices: give up the equivalent amount through a charitable donation, wait for it to be recovered in bankruptcy court, or wait until it is determined to be stolen by the federal government. And while paying off multi-thousand-dollar donations isn’t much of a financial burden for top Democrats like Jeffries or Aguilar, the much larger donations to DCCC, DSCC, and other arms of the campaign make the whole situation even more insidious and embarrassing.

Donating money does not get you out of trouble. Campaigns financial attorney Brett Cabell recently warned in an Associated Press report that these politicians should set money aside with the expectation that it will have to be returned to bankruptcy court. The Federal Election Commission requires political campaigns and committees to return donations found to have been made illegally, even if new funds must be raised to facilitate that repayment.

In fact, it is possible that the next DCCC and DSCC presidents, after they are selected, will raise money Not To kick off the 2024 campaign cycle but to drive those numbers and help get Bankman-Fried donations off the books. Very few Democrats have been willing to put themselves forward for these two jobs for this coming cycle; Even without the Bankman-Fried headache, it has become widely understood as the worst job in Washington. Now they look much worse.

Are the Republicans in the clear? of course not. FTX co-CEO Ryan Salameh gave Republicans $25 million, and FTX’s top brass funneled the money to Sen. Mitch McConnell and Representative Kevin McCarthy, as well as $3.5 million to the GOP’s Senate Leadership Fund. Bankman-Fried alleged that he gave the Republican Party as much dark money as he did in the recorded donation to the Democrats. Details of this dark money have not yet emerged. But it is very likely that Republicans will find themselves in a similar situation. Sen. John Hoven, R-North Dakota, announced that he gave $11,600 — money received from Bankman Fried and Salama — to the Salvation Army.

Back on the blue side of the aisle, critics rightly said the party capitalized on this debacle by embracing the lavish spending of a billionaire overnight. Just weeks after Election Day, the decision to accept Bankman-Fried’s involvement in the Democratic campaign had become a political burden—fueling many conspiracy theories—as well as a financial one. At best, it was a massive tactical gaffe.

Don’t forget that Bankman Fried, aside from his personal donations to the candidates, left the Democrats high and dry in the general election after pledging heavy spending. They get almost no advantage from supporting it once November rolls around. The obvious step from here would be to enact higher institutional barriers to billionaire participation and super PAC spending in the democratic political process.

However, even Democrats who disowned or donated Bankman-Fried money still benefited from it during election season; Some members of Washington’s junior class might not be without the aid of his apparatus. It is an ugly and expensive start to a new class and a new leadership system. Meanwhile, bankruptcy and criminal proceedings are only fair I started.

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