Sam Bankman-Fried’s Crypto Empire Leveraged Dark Money for U.S. Election Influence
Election Interference at its Worst
Following a month-long trial, former FTX CEO Sam Bankman-Fried was convicted in federal court on Thursday on seven counts related to defrauding investors of billions of dollars.
Thursday’s conviction came after it was discovered last November that FTX and Bankman-Fried’s cryptocurrency trading firm Alameda Research had notable overlaps on their balance sheets. This called into question FTX’s liquidity, prompting users to withdraw $6 billion from the company and leading to its bankruptcy. Bankman-Fried, or SBF, ultimately admitted to “funneling billions of dollars in customer funds to his own hedge fund,” which “upend[ed] the entire cryptocurrency sector.”
Federal prosecutors went on to file charges the following month.
According to CNBC, the 31-year-old was convicted on Thursday of “wire fraud and conspiracy to commit wire fraud against FTX customers and against Alameda Research lenders, conspiracy to commit securities fraud and conspiracy to commit commodities fraud against FTX investors, and conspiracy to commit money laundering.” SBF — who pled not guilty to the charges — now faces up to more than 100 years in prison.
The former CEO’s time in federal court may not be finished, however. According to The New York Times, SBF is facing a potential second trial regarding a separate batch of charges that include “campaign finance violations.” A campaign finance charge against the crypto guru was originally included in federal prosecutors’ first batch of indictments but was withdrawn following a dispute over extradition rules with the Bahamas, where FTX was headquartered.
If approved, the second trial would take place sometime “early next year,” according to the Times.
Election Interference at its Worst
It didn’t take long after FTX’s implosion for reporters to discover that SBF was the second-largest individual donor to Democrats during the 2022 midterms, with the former CEO having dumped nearly $40 million into entities affiliated with Democrats throughout the cycle. But what has since come to light in the months that followed is how SBF was just one facet of an orchestrated effort among FTX executives to interfere in U.S. elections.
Throughout their investigation, federal prosecutors discovered that SBF unlawfully stole and used FTX customer funds to “make more than $100 million in political campaign contributions before the 2022 U.S. midterm elections.” Central to this scheme were two members of FTX’s “inner circle“: Nishad Singh and Ryan Salame, both of whom acted as “straw donors” to donate money on SBF’s behalf. The ultimate goal, according to a communique authored by Salame, was to “‘weed-out’ anti-crypto Democratic and Republican lawmakers.”
Singh and Salame’s FEC records show that both executives made dozens of big-dollar donations to various political campaigns and PACs ahead of the 2022 elections. While Singh’s donations were directed towards Democrat entities, Salame’s were poured into Republican ones. Documents released by prosecutors last month reportedly show that SBF and the two aforementioned executives gave $50 million of the stolen FTX funds to “dark money” groups “that do not publicly disclose the names of donors” in the lead-up to the 2022 election.
Even more damning about FTX’s electioneering operation is that it appears to be a family affair. During his testimony in last month’s trial, Singh — who “pleaded guilty to fraud and campaign finance violations” earlier this year — detailed how members of SBF’s family were instrumental in steering the flow of political donations.
In his role as a “straw man,” Singh permitted Guarding Against Pandemics, a left-wing lobbying group run by SBF’s brother Gabriel, to make political donations using funds “originating from Alameda” under his name. Singh furthermore admitted to being a member of a Signal group chat that included SBF, Gabriel, and their “political advisors,” who would “frequently direct that a donation be made in Singh’s name.”
Also involved in the political operation was Barbara Bankman-Fried, Sam and Gabriel’s mother. Heavily involved in Democrat Party politics, Barbara is the founder of Mind the Gap, a left-wing super PAC that backs Democrat candidates and causes. Leading up to the 2020 election, the group issued a memo informing leftist donors that “the most effective tactic” to score “additional Democratic votes” is to donate to nonprofit voter registration groups that target demographics favorable to Democrats, such as racial minorities and college-educated women.
Among the organizations recommended to donors included the Voter Participation Center, the Center for Voter Information, and Everybody Votes (also known as the Voter Registration Project), all of which were founded by Democrats. It’s worth mentioning that partisan nonprofit voter registration is explicitly prohibited under federal law.
Regarding her involvement in FTX’s political operation, Barbara sent a communique to SBF and Singh in April 2021 in which she suggested using the latter as a straw man to funnel $1 million into Mind the Gap.
“I’m assuming that Nishad would be the better person to have his name on [the donation],” she wrote. “We’d have a slight preference for that on our end, now that my connection to Sam is publicly known, because we don’t want to create the impression that funding MTG is a family affair.”
FEC records show that Singh did, in fact, make a $1 million donation to Mind the Gap in April 2021.
Barbara also warned her son in an August 2022 email to avoid leaving behind evidence when dolling out political donations, recommending that SBF “substitute someone else’s name.”
“I’m skeptical how long that will help,” Barbara wrote. “One of these days soon, some reporter is going to think to look more closely at FEC reports.”
What are the potential implications of FTX’s election interference on the integrity and fairness of our democratic process?
Midterm elections.” They allege that these funds were funneled through various entities and PACs to hide the true source of the donations and avoid legal scrutiny. This shocking revelation raises serious concerns about the integrity of our democratic process and the influence of money in politics.
Election interference is a threat that has gained significant attention in recent years, with foreign actors and powerful interest groups attempting to sway election outcomes through various means. However, the case of FTX and its executives takes this interference to a new level. Not only did they illegally use customer funds to manipulate the political landscape, but they also sought to conceal their actions through complex financial maneuvers.
The ramifications of this election interference are significant. The integrity and fairness of our elections depend on the principle of equal participation and a level playing field for all candidates. When large sums of money are used to distort the democratic process, it undermines the voice of ordinary citizens and tilts the balance in favor of those with deep pockets. It erodes public trust in our political system and threatens the very foundation of our democracy.
Moreover, the involvement of a prominent cryptocurrency trading firm like FTX highlights the evolving nature of election interference. As financial technology continues to advance, new avenues for manipulation and abuse emerge. This case serves as a stark reminder that our laws and regulations must keep pace with these advancements to ensure the integrity of our elections.
In light of these revelations, it is imperative that we take immediate action to address this issue. First and foremost, those responsible for this egregious violation of the law must be held accountable. The conviction of Sam Bankman-Fried is a step in the right direction, but it is essential to thoroughly investigate and prosecute all individuals involved in this scheme.
Additionally, we must strengthen campaign finance regulations to prevent similar abuses in the future. Transparency and disclosure should be key principles in our electoral system, ensuring that the true sources of political contributions are known and subject to scrutiny. Stricter enforcement mechanisms should be put in place to detect and penalize any attempts to circumvent these regulations.
Finally, we must invest in public awareness and education initiatives to empower citizens with knowledge about the dangers of election interference and the importance of their voice in the democratic process. By fostering a society that is vigilant and informed, we can build a resilient democracy that cannot be easily manipulated by outside influences.
The case of FTX and its executives demonstrates the urgent need for comprehensive reforms to safeguard the integrity of our elections. We must not tolerate any form of interference that undermines the fundamental principles of democracy. It is only through collective action and a commitment to transparency, accountability, and civic engagement that we can protect and strengthen our democratic institutions.
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