And, Of Course, They're All Connected In Campaign Finance Fraud
Yesterday, Roger Sollenberger updated his December 15th Daily Beast piece, The Mysterious Problem With Sam Bankman-Fried’s Political Donations. I’ll get into it in a moment. But first let me share part of a conversation I had recently with a professional journalist from one of the country’s top newspapers, a fellow who had read an early DWT post about Scam Bankman-Fraud bribing politicians and called to discuss how it related to the corrupt politicians in his own state:
Him: Can you send me a list of all the Bankman-Fried contributions in [the state he was writing about]?
Me: No; I’ve been working on a master list of his contributions since April 16. I remember that date because it’s my sister’s birthday. His contributions— and I’m just talking about the reported ones— are so convoluted and shrouded in mystery that it’s going to take a forensic team at the DOJ to ever get to the bottom of it. Bankman-Fried admitted himself that he used “dark money” scams to funnel money to candidates. No one even knows for sure how much more than $100 million he injected into the system. He was a master of straw donors; he learned that from his crooked mother.
Him: I can’t do the piece if you don’t send me the list.
Me: Are you multi-tasking and not paying attention? There is no accurate list that even exists. The totals change with new discoveries every time I try putting one together. He purposefully tried to obscure what he was doing. That should be part of your story. The straw donor aspect of what he was up to could be a whole book.
Him: I can’t write the story if I don’t know how much he gave to [local politician], [local politician], [local politician], [local politician] and [local politician].”
Me: I have an idea. How about going to [his city’s distinguished journalism school] and offering to hire a couple of interns for school credit and have them spend a few weeks tracking down all the contributions. You’ll win a Pulitzer.
Him: I have to go now.
He never wrote the story. He will someday though. Meanwhile, thank goodness for people like David Dayen at American Prospect and Roger Sollenberger. In the latter’s update yesterday, he wrote that on Tuesday morning, when Justice Department prosecutors unsealed an indictment Bankman-Fried, “they revealed an array of serious charges against the crypto boy-king for billions of dollars in high-profile financial crimes, but the very last count opens a new mystery— an enigmatic straw donor scheme to violate federal campaign finance laws. During a press conference unveiling the charges, U.S. Attorney Damian Williams alleged that Bankman-Fried, 30, parlayed ‘tens of millions of dollars’ stolen from his clients into a side career as one of the most prolific political financiers in the country. ‘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,’ Williams said.”
Yesterday I was told that several of Bankman-Fried’s associates, including Caroline Ellison, his ex-girlfriend, FTX-co-founder Gary Wang, FTX chief regulatory officer Dan Friedberg and Brett Harrison, former FTX head of U.S. operations, have been spilling the beans about SBF’s tradeoffs with politicians, from Republican Majority Whip Tom Emmer (R-MN), Ritchie Torres (D-NY), Sean Casten (D-IL), George Santos (R-NY), Hakeem Jeffries (D-NY) and Josh Gottheimer (D-NJ) to heavy hitters like McCarthy, McConnell, Pelosi and Schumer, into whose PACs SBF dumped millions of dollars. Sollenberger reported that “While the details of the scheme are still unknown to the public, prosecutors have made some clear allegations in the wake of Bankman-Fried’s arrest earlier this week by Bahamian officials. Specifically, according to the indictment, Bankman-Fried, acting in concert with multiple unnamed co-conspirators, violated ‘prohibitions applicable to corporate contributions and conduit contributions,’ and deprived the Federal Election Commission of its ability to properly disclose donor information to the public in compliance with federal election law. Those laws require campaigns and political committees to publicly disclose the names of their donors, and they also put caps on how much money individuals can give to a group. Sometimes, however, donors seek to get around those rules by giving money in someone else’s name. Known as a ‘straw donor’ scheme, it’s one of the few campaign finance crimes that can carry prison time.” Bankman-Fried would also give money to one group that would donate it to another group that would donate it to another group until it finally wound up in a cesspool like Democratic Majority for Israel (DMFI) where it could be used to help win nominations for corrupt conservatives running in Democratic primaries.
According to Williams, millions of dollars in FTX-related donations were “disguised to look like they were coming from wealthy co-conspirators when, in fact, the contributions were funded by Alameda Research with stolen customer money,” referring to Bankman-Fried’s crypto hedge fund.
A conviction would position bankruptcy lawyers to reclaim as much as $73 million in known FTX-tied political contributions, with three people telling NBC News there was even more given to “dark money” groups.
Brendan Fischer, deputy executive director of the government watchdog group Documented, called it a “massive bipartisan campaign finance scandal” that highlights problems with transparency rules.
“The problem is that it is way too easy to pour dark money into politics. Citizens United opened new avenues for secret political spending, and Congress and the FEC have refused to close them,” Fischer said.
While some details are still unclear, Fischer said, it appears Bankman-Fried got caught in this scheme because unrelated investigations into FTX’s business practices revealed “a slew” of campaign finance violations.
“Megadonors who aren’t engaged in illegal business activities might escape scrutiny for similar dark money political giving,” Fischer said.
The allegations also get at the heart of a question about Bankman-Fried’s donations generally— which party he backed, and how, as prosecutors suggest, he hid his Republican support.
Bankman-Fried, or “SBF” as he’s commonly known, was widely understood to be a Democratic supporter. He put his name on nearly $40 million in personal political donations, with almost all of it going to Democrats, according to Federal Election Commission records. Those contributions placed him among the largest megadonors in the country, styling SBF as an aspiring George Soros—and, eventually, putting pressure on Democrats to return the money after FTX’s spectacular collapse last month.
Republicans seized on the donations to paint Democrats as corrupt, with some conservatives even pushing a nonsensical conspiracy theory that SBF was laundering financial aid for Ukraine back into Democratic pockets.
“So, he bought the Senate for the Democrats,” Fox News host Jesse Watters mused last month, adding, “If this guy was a Republican donor he’d probably be sitting in solitary confinement right now.”
But the partisan allegations were quickly complicated by the fact that SBF’s colleague, fellow FTX executive Ryan Salame, had given nearly identical amounts to GOP candidates and groups.
As it turned out, neither SBF nor his partners were simply in the tank for a certain party. At least when it came to money, SBF was a politically agnostic businessman who wanted to curry favor with whoever was in power— just as long as his public image wasn’t associated with Republican donations.
SBF has, remarkably, spoken openly about this possibly illegal donation strategy, where the embattled CEO admitted he had given “about the same amount” of money to both Democrats and Republicans.
In an interview with crypto journalist Tiffany Fong, which she recorded previously but posted this week, Bankman-Fried said he “made all the Republican ones dark.”
“Reporters freak the fuck out if you donate to a Republican,” he said. “They’re all secretly liberal and I didn’t want to have that fight.”
And so, while SBF and his colleagues, in their quest for political influence, followed the tried-and-true D.C. lobbying tradition of showering their wealth on both sides of the aisle, the CEO reportedly took steps to publicly distance himself from his Republican donations, including through “dark money” organizations.
(Bankman-Fried’s political spending adviser, Paula Dukes, who reportedly helped craft this plan, declined to comment for this article.)
Now, it appears that DOJ prosecutors, along with investigators at the Securities and Exchange Commission, believe the allegedly illegal donations to Democrats and Republicans all came from the same pool of money— funds purloined via wire fraud from FTX customers and washed to campaigns and political groups under the names of company officials.
Fischer explained that while Bankman-Fried disclosed contributions that “supported the altruistic image he sought to construct,” he was “secretly making other donations to buy political influence without the public’s knowledge.”
“That’s not how it’s supposed to work— the public has a right to know who is spending millions of dollars trying to influence our vote and our political system,” Fischer said. “Transparency is a cornerstone of campaign finance law. Wealthy donors aren't supposed to be able to pick and choose which of their big contributions are public, and which ones are secret.”
Another watchdog, Citizens for Responsibility and Ethics in Washington (CREW), appears to have seen it coming. Ahead of Tuesday’s indictment, the group had already filed a complaint with the FEC, based on Bankman-Fried’s claims about giving “dark.” Those public statements, according to the CREW complaint, suggested that SBF had incriminated himself.
CREW communications director Jordan Libowitz told the Daily Beast that while these are “serious charges,” details about the scheme are still shaking out.
“Clearly he meant it as a way to get around disclosure laws, but we don’t know right now whether he meant he gave the money to actual ‘dark money’ nonprofit groups, or whether he was using the phrase as a term of art about concealing his name generally,” Libowitz said.
Libowitz explained that when wealthy people write checks to “dark money” organizations like 501(c)(4) nonprofits, which don’t have to release donor information, it’s frequently done with “a wink and nod to get around the law”— not being overtly political, but saying the nonprofit can use the money however they want.
“But if you’re tabbing it specifically for politics as a way to hide your name, then that becomes a legal issue,” Libowitz said, adding that if the nonprofit was found complicit in the scheme, the group could jeopardize its standing with the IRS.
It’s not currently clear whether SBF or any associates donated directly to any specific dark money organizations, though NBC News reported last month that there was “much more” in those gifts.
“The thing is, who are all the groups benefiting from this money?” Libowitz wondered. “FTX really had a political agenda, pushing pro-crypto and anti-regulation people in general as a business move and not an ideological one.”
Libowitz noted the pressure on politicians to return SBF’s contributions, but pointed out that, thanks to legal limits, those direct contributions are “fairly minor” compared to what he gave to PACs and super PACs. (Super PACs associated with SBF and Salame spent heavily this cycle— Bankman-Fried’s group put more than $23 million behind Democrats, and Salame’s spent over $12 million backing Republicans, according to FEC records.) And those amounts themselves might be fairly minor compared to what SBF gave dark money groups, which can accept unlimited amounts of money.
“So if every politician gave back every direct donation, that’s still a very small portion of his political spending,” Libowitz said. “It’ll be interesting to see how these bigger groups react.”
Fischer pointed out that if a political committee discovers that a contribution was illegal, FEC regulations require the group to disgorge the money within 30 days. If the true donor is identifiable, the contribution can be refunded to the original contributor or to the U.S. Treasury.
Let me use erstwhile progressive Chuy García, a congressman and candidate for Chicago mayor as an example. Chicago political operative Clem Balanoff brokered a deal between Sam Bankman-Fried and García who had no opposition in the primary and won reelection against a November vanity candidate 68.5% to 28.1%. García says he donated the $2,900 maximum contribution Bankman-Fried sent his way to a local charity. If true, that’s good but… Bankman-Fried’s scammy PAC, Protect Our Future, which was set up to appear like it was doing something about pandemics and was just a mechanism for bribing corrupt politicians, spent $199,853 on García’s opponent-less primary, singing García’s praises, obviously to appeal to 2023 mayoral voters. Why would SBF do that, especially since he's a self-confessed conservative? Because García is a member of the incredibly corrupt House Financial Services Committee, which worked diligently to guarantee that FTX would never be meaningfully regulated in any way that would interfere with Bankman-Fried and his co-conspirators stealing $8 billion from FTX clients accounts, some of which was shared with… politicians like Chuy García, not to mention most of the members of the Financial Services Committee, but especially the Blockchain-8 led by slime bags like Tom Emmer and these unsavory characters: