This morning New York Magazine published an essay on the fall of Sean McElwee by investigative journalist David Freedlander. I was especially struck by a quote he used from progressive strategist Max Berger: “This was not just about directing donations to candidates; this was about Sean running a political strategy designed to shield crypto from government oversight so that crypto billionaires could continue to rip off working people. That’s what Sam Bankman-Fried was paying Sean McElwee for. From a progressive-politics perspective, it is unforgivable.”
You know what else is unforgivable? The fawning mass media missing what was right in front of their faces for the last few years: that a Ponzi scheme + politicians = corruption. And to this day, the media is skirting the obvious. This morning a prominent member of Congress who had read Freedlander’s piece said, “Very sad to hear about Mcelwee. Again, when power and money warp your values and principles, nothing good comes of it.”
Bankman-Fried didn’t just buy Sean McElwee, who had a flashing neon “for sale” sign on his back. He was Biden’s second largest individual donor in 2020— $5,000,000. Bankman-Fried and his FTX cohorts spent tens of millions of dollars buying the House Financial Services Committee and ingratiating themselves to Pelosi, McCarthy, Schumer and McConnell. How did the New York Times and Washington Post miss that? Why are they still downplaying it. Why isn’t Ritchie Torres (D-NY) a household name? Why is Chuy Garcia still a viable candidate for Chicago mayor? Why hasn’t Tom Emmer (R-MN) been indicted for accepting a bribe for the letter he wrote to Gary Gensler on FTX’s behalf? Why does the media continue to refer to Maxwell Frost as Congress’ first Gen Z member— I thought Madison Cawthorn was— instead of someone who took a million dollar bribe from Sam Bankman-Fried even before he was elected… but not before he formed a crypto-advisory board filled with FTX allies? Why does no one connect the dots between career-long corruptionist Sean Casten and the $500,000 he got from Bankman-Fried’s mother’s anti-progressive Mind the Gap PAC just before hiring the other son, Gabe Bankman-Fried, to open mail— and go to highly confidential Financial Services Committee meetings on crypto-regulatory rules?
And, by the way... this is how bribed politicians do oversight. Meet Republican Whip Tom Emmer who used stolen funds he got from FTX to buy his new role in the 118th Congress. This video was shot in the House Financial Services Committee.
Why? Why? Why? Data For Progress fired McElwee like a dog. What about congressional criminals like Josh Gottheimer (D-NJ), Warren Davidson (R-OH), Darren Soto (D-FL), Ted Budd (R-NC), Hakeem Jeffries (D-NY) and Byron Donalds (R-FL). And no one even mentions the FTX role in the developing scandal around Long Island congressman-elect George Santos. FTX got behind fringe-right “Democrat” Josh Lafazan in the primary and then funded both Robert Zimmerman (D) and Santos in the general.
Liz Terwilliger hit it out of the ballpark on Monday with Our Crypto Congress. “When the multi-billion-dollar crypto house of cards, FTX, along with founder Sam Bankman-Fried’s ego, deflated like a dollar-store party balloon,” she wrote, “no one was more disappointed at Sam’s arrest than Congresswoman Maxine Waters. She lamented, ‘I am surprised to hear that Sam Bankman-Fried was arrested in the Bahamas at the direction of the United States Attorney for the Southern District of New York.’ Ms. Waters was sadly robbed of an opportunity to showcase the hallowed halls of Congress echoing with recriminations over the shock and outrage felt by our saintly representatives. But House Member Waters and her sanctimonious associates can undertake a very effective investigation into this sad affair by looking in the closest available mirror. ‘Why?’ you ask. Well, young Sam had been feted as a financial genius, not only by every media outlet short of Mad Magazine, but most notably by our own Congress. 30-Year-old Sam not only pulled off a scam against thousands of investors, large and small, but his greatest sleight of hand may have been with our own government.
Before the collapse of FTX, Sam Bankman-Fried had spent many months lobbying for crypto regulation. As a general rule, whenever the head of a large business pleads with lawmakers to “please regulate me!” it is time to keep your hand on your wallet. This is because when the Zuckerberg’s of the world beg to be managed, they usually have two goals in mind, and neither of them help you or me.
The first goal is to suggest regulation that is convoluted and costly. “Why would they do that?” you ask. Because establishing difficult benchmarks helps to keep new competitors out of the market. When you are the size of a Microsoft or Apple, you can afford teams of in-house lawyers and accountants, but smaller firms and start-ups are frozen out of your business.
The second (but more important) goal is to manipulate regulators into creating rules that you prefer. The median age of the 117th Congress is 60 years old. These are people who grew up without the internet, who upon first hearing the word ‘crypto’ thought maybe it was a rock that makes Superman feel queasy. This allowed Sam to push for outlandish regulatory ideas that some members of Congress remain sold on today.
…Does Congress really need to shield billion-dollar crypto traders from onerous oversight? What can the motivation be? (You get only one guess). Congratulations, you guessed right – the answer is money. In fact eight members of Congress (split evenly with both parties) wrote a letter begging the SEC to stop asking embarrassing questions of companies like FTX.
It turns out that the majority of these Congressional letter writers were recipients of campaign donations from FTX. In fact, FTX had been actively shoveling funds to various members of Congress, to the tune of millions of dollars. Seventy million dollars, to put a number on it. These funds were sprinkled almost evenly between the major parties.
But how could Sam spend that much money on Congressional campaigns, given the legal maximum donation limits in place? Well, for an experienced currency manipulator, it wasn’t that difficult. One trick was to put money into SuperPACs and allow them to issue millions to support election campaigns. FTX even had their own Political Action Committee with the innocuous name, West Realm Shires Services, Inc. West Realm spend millions on recent elections.
Another scheme was to provide funds to FTX employees as ‘loans’ that could be used for campaign donations within the legal limits. The combination of individual donations and SuperPAC funds generating a staggering amount of good will and influence in Washington. No wonder Sam was protected and fawned over by our representatives. The list of donations is staggering.
A financial company collapses after providing huge donations to members of Congress. Sounds familiar, doesn’t it? You may be thinking of the implosion of Enron. Enron was one of America’s largest energy commodities firms that like FTX, committed accounting fraud so large that it brought about the collapse of the company, and ruining the finances of thousands of investors. Like FTX, Enron bought time and favors by donating to our representatives. (Coincidentally, the person hired to sort out Enron’s mess was John Ray, who has been hired to do the same with the FTX mess).
In the case of Enron, politicians were embarrassed enough by the bad publicity that most of them returned their donations back to the bankrupt company. These funds became part of the partial settlement given back to the defrauded investors.
It remains to be seen if our current Congressional representatives will do the same. While lawmakers appear outraged, many were strangely silent on the funds they had happily pocketed. But the continued spotlight on the FTX collapse is beginning to force some to scurry to distance themselves from the tarnished funds.
Maybe she has Jake Auchincloss (D-MA) in mind… or maybe Nancy Pelosi and Kevin McCarthy.
Early in August, before almost anyone was paying attention to the budding FTX scandal, this was a prescient headline in The Intercept:
“In recent months,” wrote Higgins, “Bankman-Fried has made a name for himself as a major liberal funder— both as a public figure and as a driver of Democratic politics. The crypto tycoon has poured hundred of thousands of dollars into the coffers of the Democratic National Committee— becoming its biggest single donor in May— and donated thousands to pro-crypto Democrats like New York’s junior senator, Kirsten Gillibrand. In addition to his personal donations, he’s funneled millions to candidates through his and his brother’s Protect Our Future and Guarding Against Pandemics PACs, which advertise aims of preventing the next pandemic. But while Bankman-Fried refines his role as an ally and influencer of the Democratic Party, other movers and shakers at FTX are keen to make their name by reaching across the aisle. Earlier this year, FTX executive Ryan Salame started his own PAC, American Dream Federal Action. Funded entirely by four donations from Salame to the tune of $12 million, American Dream is focused solely on electing Republicans… American Dream can count Katie Britt, Republican candidate for Senate in Alabama; Rep. Ted Budd, Republican candidate for Senate in North Carolina; Brad Finstad, Republican candidate for Minnesota’s 1st Congressional District; Bo Hines, Republican candidate for North Carolina’s 13th Congressional District; and incumbents Rep. Dusty Johnson of South Dakota and Sen. John Boozman of Arkansas among its success stories.”
“This is a very wealthy industry that was very happy to be unregulated,” Public Citizen’s Craig Holman told Roll Call last month. “But once the federal government started shifting attention towards regulating the industry, the same as we saw with the big tech industry, they suddenly became big political players on Capitol Hill.”
…Last month, Sam Bankman-Fried told the Washington Post that he is “really excited” about a new piece of legislation already on the table called the Responsible Financial Innovation Act. The bill, sponsored by Gillibrand, would put the Commodity Futures Trading Commission in charge of regulating crypto. The CFTC currently regulates bitcoin and ethereum futures, but the new bill would put the agency fully in charge of the crypto market — and box out the Securities and Exchange Commission.
“I think that the CFTC makes a lot of sense, though, as the market’s regulator,” Bankman-Fried told the paper. As the young industry flounders, it resorts to a method tested by its predecessors: funding the lawmakers who might regulate it. “They’re really experienced, competent, and efficient and have a deep knowledge of markets and of crypto markets, and you could do a really good job of that.”
According to Jeff Hauser, founder and director of the Revolving Door Project, “Much of the activity in the crypto space involves the buying and selling of securities, which has been regulated in the U.S. for nearly 90 years by the SEC.”
As the American Prospect reported in June, FTX’s efforts to control the regulatory sphere around crypto recall tactics deployed by the investment group Blackstone in the late 2000s. After years of primarily donating to the GOP, the financial firm pivoted to a more “both-sides” approach in the onset of the financial crisis, as executive Hamilton James became a major funder for Barack Obama— ensuring that the firm would have its bases covered after the 2008 presidential election. So while Bankman-Fried personally has donated to a number of Democrats on the Senate Agriculture Committee— Dick Durbin of Illinois and Michael Bennet of Colorado and maxing out to Chair Debbie Stabenow of Michigan as well as members Tina Smith of Minnesota and Cory Booker of New Jersey— he has also donated to Boozman, the Republican ranking member.
“They want no regulation, or they want to help write the regulation,” committee member Sen. Sherrod Brown (D-OH) told the Associated Press in May. “What else is new?”… The Agricultural Committee where Boozman sits has oversight over the CFTC.
… Among the beneficiaries of Bankman-Fried money is Rep. Ritchie Torres (D-NY), who was also the recipient of crypto cash at an April fundraiser held by executives at venture capital firm Andreessen Horowitz. In June, Bankman-Fried, along with pollsters Sean McElwee and David Shor, hosted a fundraiser for Torres, who has been a controversial figure in progressive circles for some of his more right-leaning views on Israel and other social issues.
Bankman-Fried spokesperson Mike Levine told me that Torres was a target for the group because he “has pushed for federal funding that would lead to prototype vaccines for multiple families of known viruses with pandemic potential, replenish the Strategic National Stockpile and support the domestic manufacturing of personal protective equipment, enable rapid testing, and encourage the development of therapeutics like antivirals and monoclonal antibodies.” Left unmentioned was Torres’s outspoken support for crypto both on social media and in the pages of the New York Daily News.
“You try to cultivate some allies who are likely to land in Congress and might look favorably upon that proposal regulation when the time comes and develop a relationship,” Faiz Shakir, senior adviser to Sen. Bernie Sanders said. “That appears to be what he’s doing.”
Revolving Door’s Hauser is highly skeptical— even hostile— toward what he sees as Bankman-Fried’s attempts to control the destiny of the Democratic Party. Faced with a political landscape where big business doesn’t hold the same popular support it did in the early decades of the 21st century, crypto tycoons like Bankman-Fried and Salame are ensuring that they can lock up the more populist politicians emerging from right and left. In Hauser’s view, that means finding out who’s pliable.
“They need to dig deeper into the ostensible left flank of the Democratic Party to weaken the financial regulatory ruling, because the financial regulatory movement is stronger now in the Democratic Party than it was 15 to 25 years ago,” he told me.
Not related at all— sure, sure— a quartet of NY Times reporters wrote this morning that Bankman-Greed’s lawyers are “discussing a deal with federal prosecutors that could allow the disgraced cryptocurrency mogul to be released on bail when he is extradited to the United States, according to three people with knowledge of the matter. The terms of the deal remain fluid, the people said, and any agreement would require approval from the federal judge overseeing Bankman-Fried’s case. But under the terms that have been discussed, the founder of the collapsed cryptocurrency exchange FTX could be granted bail with highly restrictive conditions, including home detention, two of the people said. One person said that electronic monitoring was also under discussion. It wasn’t clear what other measures might be required.” How about 24 hour security so that he isn’t killed by:
North Korea
The Russian Mafia
Iran
A Mexican drug cartel
The Republican Party
The Democratic Party
Anyone who may have been bankrupt by FTX