Federal prosecutors hit former FTX CEO Sam Bankman-Fried with new federal charges in an indictment unsealed in the Southern District of New York on Thursday, including allegations that the disgraced cryptocurrency darling conspired to make illegal political contributions in the names of two other executives and use misappropriated customer funds. Campaign finance data analyzed by OpenSecrets provides additional clues.
Bankman-Fried spent his way into the good graces of Washington before FTX imploded in November, wiping out Bankman-Fried’s $16 billion fortune almost overnight in one of the largest ever single-day collapses among billionaires tracked by Bloomberg.
The U.S. Attorney’s Office for the Southern District of New York unsealed an indictment in December charging Bankman-Fried with campaign finance violations, wire fraud and conspiracy to commit wire fraud, commodities fraud, securities fraud and money laundering. A federal judge released Bankman-Fried on $250 million bail, and he is reportedly under house arrest at his parents’ home.
The superseding indictment introduces new allegations that Bankman-Fried not only misappropriated FTX customer funds to become “one of the largest publicly reported political donors” of the 2022 midterm election cycle, but also that he made political contributions in the names of two other FTX executives using funds from the affiliated cryptocurrency trading firm Alameda from 2020 through the 2022 general election.
Prosecutors say Bankman-Fried and his co-conspirators collectively made more than 300 political contributions worth tens of millions of dollars, violating federal law because the contributions were made in the name of straw donors or paid for using misappropriated corporate funds. As such, prosecutors claim campaigns and PACs reported false information to the Federal Election Commission, allegedly defrauding the agency.
Bankman-Fried allegedly used straw donors to conceal the source of the contributions, circumvent federal election law and acquire bipartisan influence “at least in part to improve his personal standing in Washington, D.C., increase FTX’s profile, and curry favor with candidates that could help pass legislation favorable to FTX or Bankman-Fried’s personal agenda, including legislation concerning regulatory oversight over FTX and its industry,” the indictment claims.
Neither co-conspirator has been charged with wrongdoing, and the indictment identifies the other executives only as “CC-1” and “CC-2,” or co-conspirators 1 and 2.
But FTX’s former Director of Engineering Nishad Singh and former Digital Markets co-CEO Ryan Salame appear to be the only other federal donors — who identified themselves as FTX employees — to make publicly-reported political contributions of the scale laid out in the indictment, according to federal campaign finance data analyzed by OpenSecrets.
Bankman-Fried, Salame and Singh contributed a combined $77.3 million to federal candidates and committees during the 2022 election cycle and were among the top individual federal donors tracked by OpenSecrets. Several lawmakers returned or donated these contributions around the time FTX collapsed, and the company reportedly sent “confidential letters” on Feb. 5 requesting all contributions be returned.
Court filings reveal that Salame blew the whistle on FTX’s potential misappropriation of customer funds with Bahamian authorities, and Bloomberg reported Singh is nearing a plea deal with Manhattan prosecutors.
Salame did not respond to requests for comment from OpenSecrets. Singh could not be reached for comment.
New details emerge on alleged straw donor scheme
The indictment lays out new details about how two male executives became right- and left-leaning megadonors, respectively, if in name only. While the indictment doesn’t name the two donors, OpenSecrets data show that political contributions in Singh’s name went entirely to liberal candidates and committees, while those in Salame’s name went to conservative ones.
From at least March 2022, prosecutors say Bankman-Fried and his co-conspirators coordinated political contributions through an encrypted, auto-deleting Signal chat called “Donation Processing.” While Alameda employees generally tracked loans to executives during this period, prosecutors found transfers to Bankman-Fried and the two unnamed executives were not internally recorded in the months leading up to the 2022 midterm elections.
A Securities and Exchange Commission’s complaint filed in December alleges Bankman-Fried executed loans totaling more than $1.3 billion from Aladema. That included two instances where he was both the individual borrower and the lender as the CEO of Alameda.
An internal Alameda spreadsheet noted over $100 million in political contributions during the 2022 election, according to the superseding indictment. But no candidate or committee reported political contributions from the trading firm during the 2022 election cycle, making it unclear where that money went. Future Forward USA, a super PAC that supported President Joe Biden during the 2020 presidential election and only partially discloses its donors, reported receiving more than $5.2 million from Alameda that election cycle. Bankman-Fried himself contributed an additional $5 million to the pro-Biden super PAC during the 2020 election cycle.
At the behest of a political consultant working for Bankman-Fried, the executive referenced in the indictment as CC-1 allegedly contributed to a super PAC affiliated with pro-LGBTQ issues during the 2022 election. Despite misgivings, the executive agreed to make the donation because there was not anyone “trusted at FTX [who was] bi/gay” in a position to make the contribution.
The indictment alleges a political consultant working for Bankman-Fried told CC-1 that “in general, you being the center left face of our spending will mean you giving to a lot of woke sh*t for transactional purposes.”
LGBTQ Victory Fund received $1.1 million from Singh in 2022, by far the largest contribution the hybrid PAC received during the midterm election cycle. “We have set aside funds and will take appropriate action once we receive guidance from authorities,” a spokesman for the PAC told OpenSecrets (and CNBC).
The super PAC arm of LGBTQ Victory Fund spent nearly $1 million boosting one federal candidate during the 2022 election cycle, Rep. Becca Balint (D–Vt.). Balint previously told VTDigger she did not know Singh and emphasized expenditures by super PACs are independent and cannot, by law, be coordinated with federal candidates.
Further supporting the claim that Singh could be CC-1 is a $107,000 contribution made in his name to the New York State Democratic Committee shortly before the midterm election. An FTX employee was directed to wire $107,000 from Bankman-Fried to the committee, the indictment alleged, but Bankman-Fried then asked to update the contribution in the name of CC-1.
A contribution in Singh’s name for this amount was made to the party committee on Oct. 28, 2022, Puck News reported. It’s the only $107,000 contribution the committee has ever received, an OpenSecrets analysis of New York State campaign finance data found.
Bankman-Fried previously claimed he gave equal amounts to both parties but kept his Republican contributions “dark” to avoid negative media attention. The indictment alleges CC-2 publicly aligned himself with conservative candidates and causes, and Salame contributed around $23.5 million to right-leaning federal candidates and causes during the 2022 election cycle.
As FTX customers rushed to withdraw their funds in November and FTX faced a solvency crisis that ultimately resulted in its spectacular collapse, prosecutors say CC-1 messaged Bankman-Fried to say he was concerned about approximately $80 million in “donations/personal/etc that went through my bank [account] and are in my name.”
CC-1 proposed a back-dated transaction to undo debts he may have owed as “loans” on Alameda’s ledgers and the retroactive sale of cryptocurrencies to remove his financial liability to FTX and Alameda, which prosecutors allege “would have further concealed the campaign finance scheme.” But FTX collapsed before the transaction was completed.
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Source: OpenSecrets.org
