FTX founder and former CEO Sam Bankman-Fried was charged with violating a slew of campaign finance laws on Tuesday, marking another major blow for the former crypto leader.
According to the unsealed indictment, the U.S. District Court in Manhattan alleged that in addition to committing securities and wire fraud, Bankman-Fried gave a minimum of $25,000 in campaign finance donations to campaigns and political action committees “in the names of other persons.”
The court also said Bankman-Fried and others conspired to make “corporate
contributions to candidates and committees in the Southern District of New York that were reported in the name of another person.”
The charges against Bankman-Fried in relation to campaign finance laws are notable given his status as one of the most prominent political donors in this campaign cycle.
“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,” Damian Williams, the U.S. attorney for the Southern District of New York, told reporters at a news conference on Tuesday.
Additionally, a civil complaint filed by the Securities and Exchange Commission accused Bankman-Fried of using his crypto investment firm Alameda “as his personal piggy bank to buy luxury condominiums, support political campaigns, and make private investments, among other uses.”
“This was a massive, massive campaign finance scheme to buy political favors,” said Craig Holman, the government affairs lobbyist for the consumer rights advocacy group Public Citizen. “He’s facing some very serious consequences that could add up to 20 years in prison or more.”
Earlier this month the watchdog organization Citizens for Responsibility and Ethics in Washington (CREW) filed a complaint with the Federal Election Commission requesting that it investigate Bankman-Fried for campaign finance violations.
“Taking him at his word, Bankman-Fried was able to direct at least $37 million to influence federal elections while evading federal laws that require disclosure of the true source of the contributions,” CREW’s senior vice president and chief counsel Donald Sherman said in a statement announcing the complaint last week.
The complaint points to an interview Bankman-Fried gave to cryptocurrency vlogger Tiffany Fong in which he said he donated to Democrats and Republicans, but that all of his Republican donations were “dark.”
“Despite Citizens United being literally the highest-profile Supreme Court case of the decade and the thing everyone talks about with campaign finance, for some reason, in practice, no one can possibly fathom the idea that someone actually gave dark. All my Republican donations were dark,” Bankman-Fried told Fong.
“The reason was not for regulatory reasons, it’s because reporters freak the f— out if you donate to Republicans. They’re all super liberal, and I didn’t want to have that fight,” he said.
According to Open Secrets, Bankman-Fried was the second biggest donor to Democrats this election cycle, publicly giving nearly $40 million. However, only about $235,000 in donations from Bankman-Fried was publicly listed as going to Republicans.
“We’re off in a different world where we don’t have a donor saying what they’re doing and they will feign ignorance,” CREW’s senior litigation counsel Stuart McPhail said. “The way they’ll play cute and get around charges is they’ll say ‘I didn’t give money to this person or this 501(c) to then give it somebody else. I was giving them a general charitable contribution. I was just giving them a gift and they just chose on their own to hand it over to somebody else.’ And unfortunately, that works too well with the FEC.”
“But here we have a donor literally saying ‘I was giving money to candidates, I knew where it was going, that was the point. But I was doing it in a way to evade reporting,’” McPhail said.
McPhail added that the charge shows there is at least “probable cause” there is a violation of campaign finance rules.
“It’s pretty bare bones,” he said. “We don’t know exactly what they’re including here. All they allege is at least $25,000 [in contributions]. Based on the complaint and what he said, we’re talking more like $37 million, potentially if you take his boast about being the second biggest donor, that could be up to $80 million.”
Holman agreed that the $25,000 cited in Tuesday’s unsealed indictment is likely “just the tip of the iceberg.”
“I suspect since Bankman-Fried felt free to launder money through third parties, he would have done so with the dark money contributions as well,” Holman said.
Tuesday’s development is the latest in the turbulent saga involving Bankman-Fried and his ill-fated cryptocurrency company FTX. Bankman-Fried was arrested on Monday in the Bahamas, which was where FTX was established and run until its collapse. He is set to be extradited to the U.S.
Bankman-Fried was originally set to virtually testify before the House Financial Services Committee on Tuesday. However, the committee still received testimony from attorney John Jay Ray III, who was tapped to shepherd FTX through its demise and has extensive experience in dealing with corporate bankruptcies.
While the former crypto billionaire’s future remains grim, experts say the fiasco could present a silver lining for campaign finance reform.
“We frequently get some of our best campaign finance reforms following scandals that are massive in scale,” Holman said. “We’re talking foreign money, corporate money, we’re talking laundered money. This is a massive scandal that could give rise to some serious campaign finance reforms.”