As we saw yesterday, politicians partook in millions of dollars that were stolen by Sam Bankman-Fried (the Democrat briber) and his lower-key partner, Ryan Salame (the Republican briber). The two criminals were working both sides of the aisle— and no one was asking where the money was coming from, just how high they needed to jump to get in on it.
This Alan Grayson ad explained it in terms of his Bankman-Fried-financed opponent, pretend-progressive Maxwell Alejandro Frost (D-FL) who is going to Congress— along, presumably-- with his crypto advisory committee:
Yesterday, the Washington Post published a report by Tony Romm: Congress took millions from FTX. Now lawmakers face a crypto reckoning. Frost isn’t even a lawmaker yet… and he’s already indelibly stained with the crypto-corruption, one of dozens of politicians from both parties who are. Another pretend-progressive, Ritchie Torres, coincidentally, Frost’s congressional champion and crypto’s congressional champion, and Bankman’s congressional champion and a member of Frost’s crypto advisory committee and— alarms bells clanging— a member of the House Financial Services Committee.
Romm reported that “Only a few weeks ago, top Democrats and Republicans alike had been cashing campaign checks and working side-by-side with the vanguards of the industry, including FTX founder Sam Bankman-Fried, as they labored to craft new regulation in the frenetic, cutting-edge digital space. Instead, Bankman-Fried unexpectedly became a potential case study of the costs of congressional inaction. While Washington dithered, he appeared to place risky bets that incinerated his fortune, jeopardized billions of dollars in Silicon Valley capital and upended an entire ecosystem of cryptocurrency start-ups. The lawyer tapped to lead FTX in restructuring, who previously oversaw the bankruptcy of Enron, described the situation Thursday as a ‘complete failure of corporate controls.’ Investigators in the United States and abroad have opened probes into Bankman-Fried and his holdings. The Treasury Department has quietly placed calls to other large crypto exchanges to assess the risks of a broader contagion. And a slew of congressional committees have readied their own reviews, including a House inquiry announced Wednesday that could see Bankman-Fried testify under oath next month.”
The Establishment will now close ranks, return a tiny amount of the tens of millions of dollars Bankman-Fried and Salame doled out, and once again pretend that there can be a briber without a bribee. Aside from massive amounts of money spent in districts-- including districts requested by Hakeem Jeffries-- SB-F gave $6 million to Pelosi's SuperPAC and a million to Schumer's SuperPAC.
[F]ederal policymakers have been left to ask themselves a familiar, if uncomfortable question: Could they have prevented a crisis if they had paid close attention sooner?
“Over the years, the regulators... sorta invited them in, these crypto companies, and we’ve seen the damage they’ve caused,” said Sen. Sherrod Brown (D-OH), the chairman of the Senate Banking Committee.
Brown said he is exploring the need for comprehensive cryptocurrency legislation, something that Congress repeatedly has proposed as the sector grew, yet time and again has failed to achieve in the face of staunch industry lobbying. In that time, a wide array of crypto firms have experienced meteoric rises— and once-unfathomable collapses— on the promise of great wealth that didn’t always materialize.
Still, Brown remained bullish that Congress could rein in cryptocurrency companies that have put investors large and small at risk: “They need to be held accountable.”
In some ways, the tumult around FTX tells the story of a Capitol often outpaced by the deft technology giants ostensibly under its watch.
From the burst of the dot-com bubble at the turn of the millennium to the rampant privacy mishaps at Facebook decades later, federal policymakers historically have been slow to anticipate the troubles of the digital age. Only after massive, costly scandals have lawmakers and regulators been stirred to action, sometimes with less-than-desirable results.
The nascent world of cryptocurrency— where digital tokens replace dollars, investments and payments, all without the need for traders, governments or banks— has presented perhaps the most complicated challenge to date. As an entirely new financial system has come online, Washington has been forced to choose whether to institute stringent rules on crypto or stay out of Silicon Valley’s way.
The U.S. government largely has adopted the latter approach, much to the relief of crypto companies, executives and investors. That has enabled the rapid growth and soaring valuations of bitcoin, a wide array of related currencies and an entire ecosystem of firms to support them. Until recently, that included FTX, a marketplace for buying and selling tokens that boasted its own currency— an exchange that at its height was the third-largest in the world.
But the peril of that approach came into sharp relief as FTX began to unravel. Questions about its finances— and whether Bankman-Fried used FTX deposits in potentially illegal ways— prompted large investors to sell off their FTX-issued tokens, known as FTT. With nowhere to turn and losses mounting, Bankman-Fried filed for Chapter 11 bankruptcy last week, setting off a cascading effect that has hammered Silicon Valley venture firms and start-ups that depended on FTX. Other crypto exchanges soon after found themselves at risk, with their own assets tied up in the fallout.
John Ray III, who became chief executive of FTX in bankruptcy, told a federal court Thursday that he had never seen in his career “such an absence of trustworthy financial information as occurred here.” Jay said he had previously supervised the $23 billion dissolution of Enron and its recovery of funds for creditors, yet still suggested the FTX meltdown is in some ways worse.
“From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented,” he wrote in the court filing.
On Capitol Hill, the fiasco quickly captured unexpectedly wide, bipartisan attention.
The shift began Tuesday, as lawmakers sorted out the repercussions of the 2022 elections. At a news conference normally reserved for Democratic leaders to lob political barbs and issue policy announcements, Rep. Hakeem Jeffries (D-NY), the caucus chair, said the party had plenty of priorities in the waning weeks of the year— and “the situation related to the cryptocurrency industry will be one of them.”
And what Jeffries, an ally of Bankman-Fried’s, means by that is that Congress will cover up for cronies of his like Torres and the other recipients of Bankman-Fried’s largess. Remember, Bankman-Fried spent $28 million buying politicians this cycle, from ethics-free incumbents like Torres, and Shontel Brown (OH) to unsavory but successful candidates, headed for Congress, like Valerie Foushee (NC), Robert Garcia (CA), Morgan McGarvey (KY), Robert Menendez Jr (NJ), Jared Moskowitz (FL) and the aforementioned Maxwell Frost (FL). Some crooked members of Congress formed a Congressional Blockchain Caucus do make it easy to get in on the action. There co-chairs are 4 total sleaze balls: Tom Emmer (R-MN), Bill Foster (D-IL), David Schweikert (R-AZ) and Darren Soto (D-FL). Among the members are some of the most corrupt members of the House, like Mo Brooks (R-AL), Lauren Boebert (R-CO), Kat Cammack (R-FL), Matt Gaetz (R-FL), Josh Gottheimer (Blue Dog-NJ), Maria Salazar (R-FL) and, obviously, Ritchie Torres (D-NY).
There has been a dearth of reporting, so far but not much longer, on the FTX crew’s connection to drugs and sex scandals, as well as to one prominent crypto-murder. Romm reported that “In recent years, Democrats and Republicans at various turns have tried to regulate cryptocurrency, introducing a range of measures to empower federal agencies and pursue abuses, including fraudulent coin offerings and international money laundering. They’ve also held a number of major hearings, even grilling Facebook CEO Mark Zuckerberg in 2019 over his company’s doomed crypto effort, known as Libra. Law-enforcement agencies, meanwhile, have prosecuted some of the worst actors— unveiling charges in August, for example, against 11 individuals allegedly involved in a $300 million pyramid scheme. And President Biden himself recently has been engaged, signing an executive order in March that offered an early road map for how Washington might approach cryptocurrency regulation.”
But the government at times has faced blowback for acting too aggressively. This March, for example, a bipartisan group of lawmakers known as the Congressional Blockchain Caucus took aim at the Securities and Exchange Commission over its attempts to “gather information from unregulated cryptocurrency and blockchain industry participants.” Its signatories included Rep. Tom Emmer (R-MN), a caucus co-chair who has argued in the past that the SEC has misused its authorities to assert jurisdiction over cryptocurrency.
Emmer is set to serve in a key House leadership role under a Republican majority next year. Appearing at an industry conference on Wednesday, the GOP lawmaker urged Congress not to adopt a “wet blanket” of regulation in the wake of the FTX crisis.
“We need to use the stage that is Congress to promote all of you beyond the walls of the Capitol,” added Emmer, whose comments were first reported by the publication CoinDesk. “People need to understand more out there that they shouldn’t be afraid of this.”
…Adding to the challenge, the government has faced an onslaught of lobbying from an increasingly powerful and profitable industry.
Since January alone, cryptocurrency exchanges and their advocates have spent more than $14.8 million to influence regulators and lawmakers, according to lobbying data compiled by OpenSecrets. Bankman-Fried and other FTX leaders, including Ryan Salame, the company’s co-chief executive, also donated more than $70 million in the 2022 election, the analysis showed. That made them the third-largest contributor in the two-year cycle, OpenSecrets found.
“The Senate has trouble keeping up with things that lobbyists prefer the Senate not keep up with,” said Sen. Elizabeth Warren (D-MA), a veteran of the 2008 financial crisis, after which she oversaw congressional efforts to keep watch over big banks. Reflecting on the reasons for congressional inaction, she added: “I have said for a very long time now that we need better regulation in this space.”
On Capitol Hill, FTX and its lobbyists actively guided lawmakers in writing legislation that would govern the company and its industry rivals. A regular in Washington, Bankman-Fried personally provided input to Sens. Debbie Stabenow (D-MI) and John Boozman (R-AR), who introduced a bill this year that would shift some crypto oversight to the Commodity Futures Trading Commission.
The CFTC regulates complicated financial instruments known as derivatives, as well as futures contracts for agricultural products. The crypto industry generally prefers that agency over the SEC, which governs stock and bond markets and is perceived as more aggressive. Lawmakers and administration officials have split over which regulator should have jurisdiction, partly a reflection of the complexity in defining crypto assets— whether they are commodities or securities— under law.
As she raced to a Senate vote this week, Stabenow acknowledged she had solicited feedback from “all the stakeholders… including Sam” on cryptocurrency regulation. A beneficiary of more than $20,000 in campaign donations from Bankman-Fried this election, the senator added she was “extremely surprised, of course— we all were extremely surprised and disappointed” at the downfall of FTX.
But Stabenow still stood by her legislation as an antidote to the risk and abuse seemingly rife in cryptocurrency: “That’s exactly why we need our legislation, so the CFTC can proactively provide regulation and transparency to consumers.”
Other lawmakers, though, feared that the bill had become tainted by FTX’s influence. Brown, the leader of the Senate Banking Committee, specifically acknowledged “concern” that Bankman-Fried and his industry allies had too great a hand in shaping the legislation, noting it “needs major improvement.”
“I think you look at any of the legislation, any legislation written here, [and it’s] always the fingerprints of the big banks. In this case, the big crypto companies are always all over it,” Brown continued. “That’s the fight I make every day in this committee, and it’s the fight we’ll make on this.”
As the FTX collapse rippled through the crypto world, the Biden administration urged Congress to act. On Wednesday, Treasury Secretary Janet Yellen issued a public warning about dangers to the economy as she called on lawmakers to fill in the remaining regulatory “gaps.” She said the agency’s prior reports had identified a wide range of “risks” that ultimately were “at the center of the crypto market stresses observed over the past week.”
Behind the scenes, top Treasury officials have been in close contact with major cryptocurrency exchanges and other companies in recent days to assess the FTX fallout, according to an aide who spoke on the condition of anonymity to describe the conversations. Some lawmakers, meanwhile, signaled they were exploring a raft of new proposals in the hopes of protecting Americans who buy, own and sell cryptocurrency.
OK, so what about the murder? Let’s start with who (the guy in the photo just above). In the crypto-universe, 29-year old Nikolai Mushegian was considered a visionary, an innovator (especially in regard to Ethereum) and a Blockchain security genius. He was a co-founder of MakerDAO. In late October, he was found dead after threatening to expose FTX’s insolvency and their brewing sex and drugs scandal. He lived in Puerto Rico and was found drown by a beach patrol.
The tweet on the left is from last night. It's definitely breaking news if you're following this wild, crazy story. The tweet on the right is from last weekend. I sure hope the DoJ is into this case now and they're not going to leave it to a gaggle of complicit politicians or corrupted Bahamians (newly enriched with digital assets).
One more thing: Be sure to read Noah’s substack today about the nature of imaginary crypto-“wealth.” He explains that “many of the super-rich crypto people whose fortunes you see reported in the press could only raise a small fraction of that amount in cash — not because they’re frauds or because their companies are bad (though these may also be the case), but simply because there aren’t many buyers out there for their tokens.”
Listen to Sam Bankman-Fried speaking to CNBC. He's completely stoned out of his mind but uses words and phrases that make people think he must know what he's talking about even if they don't completely understand what he means:
UPDATE: Elon gets it
This FTX thing has the potential to topple the American political system. It might, for example, be the perfect time for a third party to offer an alternative to the two establishment parties that are demonstrably steeped in corruption beyond comprehension. I spoke with half a dozen members of Congress or their chief of staff since this post came out this morning. Not one wanted to make the connection that Elon Musk just did on his troubled social media platform: