Ill-Gotten Gains: Crypto Kingpin's Donations Put Democrats in the Hot Seat

Sam Bankman-Fried is under federal investigation and suspected of defrauding his investors

Sam Bankman-Fried / Getty Images
November 15, 2022

The embattled crypto billionaire Sam Bankman-Fried, who is now under federal investigation and suspected of defrauding his investors, spent the election season shelling out cash to Democrats: $865,000 to the Democratic National Committee, $1 million to Sen. Chuck Schumer's (D., N.Y.) Senate Majority PAC, and $6 million to the House Majority PAC.

With each passing day, it looks more and more like FTX's customers won't get their money back. But Democrats won't say whether they're going to hang on to the cash. The Democratic National Committee, Senate Majority PAC, and House Majority PAC did not respond to requests for comment about Bankman-Fried’s donations. The White House has also not weighed in on Bankman-Fried’s $5 million contribution to Future Forward PAC, which spent $74 million in support of Biden in 2020.

The White House’s connections to Bankman-Fried could draw the interest of House Republicans should the GOP win control of the House. The Washington Free Beacon reported Bankman-Fried and his team of lobbyists at FTX met with top Biden White House officials during visits on April 22, May 12, and May 13.

Bankman-Fried gave roughly $40 million to Democrats during the 2022 election cycle, making him one of the biggest donors to a fundraising juggernaut that helped stave off a Republican wave in the midterms. While the 30-year-old entrepreneur contributed to a handful of Republicans, the lion’s share of his spending has gone to Democrats. He contributed $250,000 to the Democratic Congressional Campaign Committee, $66,500 to the Democratic Senatorial Campaign Committee, and $400,000 to the Democratic Grassroots Victory Fund.

Bankman-Fried dangled the prospect earlier this year of giving up to $1 billion to Democrats in the midterms.

Sen. Dick Durbin (D., Ill.) and Rep. Chuy Garcia (D., Ill.) said their campaigns will direct Bankman-Fried’s $2,900 campaign contribution to charity, the Daily Beast reported. Rep. Dave Schweikert, one of a handful of GOP beneficiaries, said he would return a $2,900 contribution from Bankman-Fried's top lieutenant Ryan Salame.

When FTX came crashing down this month amid a liquidity crunch, FTX account holders saw their portfolios wiped out. Bankman-Fried is reportedly "under supervision" by authorities in the Bahamas, where he lives, for potential fraud charges. Federal agencies are investigating whether Bankman-Fried misused billions of dollars in customer deposits at FTX to prop up a hedge fund he controlled.

While Bankman-Fried garnered widespread media praise in recent years as the fresh face of the crypto industry, a small cadre of skeptics have sounded the alarm on what they saw as a money laundering operation or Ponzi scheme.

"[FTX] is a massive money laundering, Ponzi scheme fraud with a crypto wrapper. This has nothing to do with crypto. This shit needs to stop," Marc Cohodes, a veteran short seller, said in September. Cohodes said Bankman-Fried’s source of wealth remains a mystery and questioned Bankman-Fried’s intentions with his donation to lawmakers.

"One suspects he donated millions to Democrats, knowing it would insulate him from press criticism and also help with regulators," said Scott Walter, president of Capital Research Center, a conservative watchdog group. "Perhaps his wild claim he'd give up to $1 billion to Democrats aimed to make him ‘Too Big To Jail.’"

The debate is reminiscent of that surrounding Bernie Madoff, the Ponzi scheme operator who gave hundreds of thousands of dollars to Democrats. Some of Madoff’s beneficiaries, including Hillary Clinton, declined to return campaign donations. The Democratic Senatorial Campaign Committee refunded $100,000 to Madoff in 2009, according to campaign finance disclosures.

Bankman-Fried was a fixture on Capitol Hill, meeting with lawmakers and congressional aides on a routine basis to shape regulation of the crypto industry. He testified before the House Financial Services Committee on Dec. 7, 2021, where he touted his company’s success and his own personal "commitment to giving back." He testified before the House Agriculture Committee on May 12, the same day he met with top White House counselor Steve Ricchetti.

Bankman-Fried’s brother, Gabe, visited the White House on March 7 along with Jenna Narayanan, a Democratic strategist who once worked for Tom Steyer and the Democracy Alliance, a network of wealthy liberal donors who fund left-wing causes.

Days after that visit, Sam Bankman-Fried appeared on a panel with Rep. Maxine Waters (D., Calif.), who oversees crypto issues as chairwoman of the House Financial Services Committee.

Waters dismissed questions this week about whether her colleagues should return donations from Bankman-Fried. Instead, she said that the scandal is "unfortunate because it just puts a bad eye on cryptocurrency."

"And so we’ll see what happens," she told the Daily Beast.