FTX founder Sam Bankman-Fried is led by officers of the Royal Bahamas Police force following his arrest.
Mario Duncanson | Afp | Getty Images
Before FTX founder Sam Bankman-Fried was arrested within the Bahamas on multiple criminal securities fraud violations Dec. 12, he was considered the crypto “darling” of Washington, helpfully testifying before Congress, meeting with regulators and lavishly spending tens of hundreds of thousands on political campaigns.
U.S. prosecutors say no less than a few of that cash got here from Alameda Research, a hedge fund he founded. He and his co-conspirators allegedly diverted billions of dollars in customer funds from FTX to Alameda that were then misused in a wide range of ways, including to donate to political candidates and campaigns, federal prosecutors said.
The campaign finance violations detailed in a 14-page indictment are quite a few and varied. Prosecutors from the Southern District of Latest York accuse Bankman-Fried of conspiring with others to make and receive illegal campaign donations, hide those donations, misuse corporate donations and of improperly using a conduit to cover the donations. Bankman-Fried “and others known and unknown” also allegedly gave money under other people’s names and exceeded limits on political contributions, in line with the indictment.
While prosecutors don’t name Bankman-Fried’s co-conspirators, they said he worked with “others, known and unknown, (who) knowingly did mix, conspire, confederate, and agree together and with one another to defraud america” to intentionally skirt campaign finance laws, in line with the indictment. Prosecutors are reportedly former FTX director of engineering Nishad Singh, the co-CEO of FTX digital markets Ryan Salame, in addition to contributions by Alameda Research and FTX, The Latest York Times reported. Bankman-Fried, Singh and Salame, combined, contributed no less than $70 million toward the 2022 midterms, in line with data from nonpartisan campaign finance watchdog OpenSecrets.
Singh and Salame didn’t reply to requests for comment. A spokesman for Bankman-Fried declined to comment.
Bankman-Fried became a prolific political donor lately, giving almost $40 million in publicly disclosed contributions mostly to Democrats within the 2022 midterm races. State and federal campaign finance data and nonprofit records show numerous questionable donations now under increased scrutiny that indicate Bankman-Fried could have spent hundreds of thousands greater than previously disclosed currying favor with Washington lawmakers.
Family ties
He’s publicly admitted that he also gave roughly $40 million to Republicans through the campaign cycle, although those payments weren’t publicly disclosed and are not counted toward his total donations.
Not one of the groups, candidates or nonprofits that received donations from Bankman-Fried or his executives have been charged with any crimes, and the indictment notes that simply because a gaggle receives a donation later deemed illegal doesn’t mean that they had any knowledge it was. The Latest York Times reported that prosecutors have sent emails searching for more information from Democrats and Republicans on a number of the donations.
Bankman-Fried and his colleagues were also generous donors to charities and political causes championed by his family. The disgraced CEO donated to his brother Gabe Bankman-Fried’s nonprofit organization, Guarding Against Pandemics. Bankman-Fried’s mother, Barbara Fried, ran Mind the Gap, a super PAC that backed mostly Democratic issues. Singh personally donated $1 million to the group.
Mind the Gap reportedly worked as a donor advisory group that helps Democrats raise campaign money, nevertheless it made zero publicly disclosed donations to candidates, parties or other political motion committees, in line with OpenSecrets.
Alameda Research donated greater than $12 million to Gabe Bankman-Fried’s nonprofit since late last yr, in line with California state campaign finance records. Guarding Against Pandemics used the funds to assist finance a campaign to support a California ballot initiative that will levy a special tax against people making greater than $5 million a yr to fight future pandemics, in line with state records. The ballot measure will likely be voted on within the 2024 election.
The nonprofit wiped all traces of the Bankman-Fried brothers off its website after FTX filed for bankruptcy in November, including a mention of Sam Bankman-Fried as one among its donors. The web site doesn’t mention Alameda as a sponsor, despite the fact that almost one-fourth of its total donations last yr got here from the hedge fund, records show. The nonprofit spent over $1 million since last yr lobbying the federal government on pandemic-related matters, including engaging with White House officials, in line with disclosure reports.
The group’s 2021 tax record, which was obtained by CNBC, shows the organization raised $22 million last yr. The organization doesn’t publicly disclose its donors on that form. California state campaign finance records show Alameda donated $5 million to Guarding Against Pandemics last yr and $7.1 million this yr.
A representative for Guarding Against Pandemics didn’t reply to a request for comment.
“This appears to be one more example of diversion of FTX customer funds without the knowledge or consent of FTX customers,” Richard Painter, the previous chief ethics lawyer in George W. Bush’s White House, told CNBC after reviewing the donations. “An open query is how much the recipient of those funds — whether political candidates or Gabe’s nonprofit — knew concerning the true source of the funds that they had received — i.e. that that they had FTX customer money.”
Donations to Democrats
While Guarding Against Pandemics boasts on its tax filing that the group “advocates for public investments to stop the subsequent pandemic,” its 2021 records show it donated to no less than two groups aligned with the Democratic Party.
The charity donated $100,000 to the House Majority Forward, a 501(c)(4) nonprofit affiliated with House Majority PAC, in line with the tax form. Each groups work to assist Democrats get elected to the House of Representatives. The House Majority PAC received a $6 million donation from Sam Bankman-Fried through the 2022 election.
Guarding Against Pandemics also gave $1 million to Voto Latino Motion Fund, a nonprofit voter registration group. A spokesman for Voto Latino said an email that “Guarding Against Pandemics gave us funding to oppose [Democratic] Governor Newsom’s recall; the funds were received and spent in reference to that effort last yr. There aren’t any funds remaining from this organization.”
Guarding Against Pandemics also paid political communications and media company GMMB just over $690,000 last yr for promoting and production, its tax form says. That firm received $24 million from various Democratic campaigns through the 2022 elections, in line with OpenSecrets. Jim Margolis, a founding partner of GMMB, served as a senior advisor to former President Barack Obama’s 2008 and 2012 runs for the White House.
A spokesman for GMMB told CNBC that the payment from Guarding Against Pandemics to the firm was for a “media buy.”
“This was a media buy placed for Guarding Against Pandemics. GMMB was not involved in developing the strategy, creative or production of the promoting and easily placed the media buy with stations like NBC Universal who were the beneficiaries of the ad spending. It was not a fee for GMMB,” the spokesman said.
Alameda backs Biden PAC
Alameda Research also delved into politics, donating $5.24 million in 2020 to Future Forward USA, an excellent PAC that backed President Joe Biden’s White House win, in line with Federal Election Commission records. Bankman-Fried individually donated $5 million to the super PAC that cycle. A representative for the PAC didn’t reply to a request for comment.
While U.S. prosecutors didn’t release details of specific donations, they said Bankman-Fried “and his co-conspirators made hundreds of thousands of dollars in political contributions funded by Alameda Research to federal political candidates and committees prematurely of the 2022 election.”
“To hide the proven fact that those contributions were paid for using funds from a company and to evade contribution limits and reporting requirements, Bankman-Fried caused contributions to be reported within the names of co-conspirators somewhat than within the name of the true source of the funds,” they said in a press release announcing the indictment.
Stuart McPhail, an attorney from Residents for Responsibility and Ethics in Washington, said the Future Forward donation could have violated campaign finance laws if Alameda was posing as a front for another person.
“It will be illegal, nevertheless, if Alameda was not the true source of the funds, but was merely a conduit for another person’s money,” McPhail said in an email to CNBC. “After all, it might also break other laws, outside of campaign finance, if Alameda was stealing money to make those contributions. Given the DOJ’s, the SEC’s, and the CFTC’s allegations, it is sort of possible that’s what happened.”
The ethics group filed a criticism to the FEC before Bankman-Fried’s arrest, asking them to analyze the previous FTX CEO for alleged “serious violations” of election law. They cited Bankman-Fried’s admitted contributions of “dark” money to Republican election efforts through the 2022 primary season.
Prime Trust
A Las Vegas-based fintech company called Prime Trust was listed as donating $14 million in February and March to Protect Our Future, an excellent PAC that backed Democrats through the 2022 primary season, FEC filings show. That cash, nevertheless, reportedly got here from Sam Bankman-Fried and Singh, in line with Politico.
Erin Holloway, the president of world marketing for Prime Trust, told the outlet on the time that the corporate was “identified within the PAC filing solely since the transferred funds were held in an account under Prime Trust’s name for the good thing about a selected customer, and Prime Trust originated the wire transfer on the direction of that customer.”
Though Prime Trust didn’t say on the time who the client was, Scott Purcell, the corporate’s founder, told CNBC, “I do know that FTX was a customer of Prime Trust.” FTX, on the time, told Politico that the client Prime Trust referred to in its explanation of the donation was Bankman-Fried.
The Oregon State Democratic Party reported a $500,000 donation labeled as being from Prime Trust, which turned out to be from Singh, in line with The Oregonian/Oregon Live. CNBC discovered other October filings that say they originated from Prime Trust, including contributions to the campaign of Sen. Raphael Warnock, D-Ga., in addition to the successful Democratic gubernatorial campaigns of Michelle Lujan Grisham of Latest Mexico and Laura Kelly of Kansas. The campaign of Rep. Lou Correa, D-Calif., also picked up a donation from Prime Trust in October.
The corporate confirmed in an email that FTX.US was a Prime Trust customer.
“When a customer makes a payment through Prime Trust … the bank processing the payment includes Prime Trust’s name in payment instructions since the payment is from an account in our name,” Matt Parrella, Prime Trust’s general counsel, told CNBC in a press release. “The recipient (i.e., PAC) could have to look beyond account name to find out the donor.”
Representatives for Warnock, Lujan Grisham, Correa and Kelly didn’t reply to requests for comment.
Brendan Fischer, the deputy executive director on the watchdog group Documented, told CNBC in an email that the October contributions were “surprising” and the FEC would likely ask the campaigns to refund those donations or attribute them to a person.
“Campaign committees cannot accept corporate contributions, and may only accept contributions from LLCs taxed as partnerships and where the contribution is attributed to the partners,” Fischer said. “The FEC goes to follow up with Warnock and Correa and ask that the Prime Trust contributions be refunded or attributed to a person.”