In a press release on Sunday, the caretakers of the bankrupt FTX estate announced that they were sending confidential messages to politicians, political action funds, and other recipients of contributions made by the exchange and its former leadership, including founder Sam Bankman-Fried, to request the return of the money.
Before its collapse, FTX was a prolific source of political donations, both from the company itself and its cadre of executives. In a document released in mid-January by the FTX estate, lawyers estimated that the company and its staff had spent $93 million on contributions, which are now under review.
Part of the company’s success came from its prodigious lobbying efforts in Washington, which took the form of both donations and frequent visits to the Capitol by Bankman-Fried. According to a report by CoinDesk, one in three members of Congress received donations from FTX executives, with Bankman-Fried himself contributing at least $40 million in the past two years.
Though he gave most of that money to Democrats, Bankman-Fried claimed to have donated an equivalent amount to Republicans in the form of “dark money” contributions so that reporters could not trace the transactions back to him and, as he put it on a podcast, “freak the fuck out.”
In the wake of FTX’s collapse, numerous politicians who received donations from the company and its employees tried to distance themselves from FTX, including giving the money to other charitable causes.
As part of the bankruptcy process, however, there has been rampant speculation by experts that the estate would “claw back” the funds or require anyone who had received money from FTX—whether in the form of political donations or venture funding—to send the funds back to be distributed among the estate’s creditors.
In response, some politicians went further than just donating their contributions from FTX, instead setting them aside in case of a possible clawback. Complicating the matter, it is unclear exactly who fell into the FTX orbit. Sam Bankman-Fried's brother Gabriel, for example, was also a prolific donator, as were other people associated with the disgraced founder.
As a result, there have been accusations that Bankman-Fried used “straw donors,” or an illegal form of campaign contributions where someone funnels donations through other parties. When the U.S. Department of Justice charged Bankman-Fried in December, the eight-count indictment included alleged violations of federal campaign finance laws.
A long-anticipated action
The language of Sunday’s press release from FTX was spare and did not mention who it considered being under the company’s umbrella, instead instructing parties to return funds donated by “officers or principals of the FTX [contributors].”
The letter provided an email address that potential recipients could contact to begin the process of returning the funds, and noted that caretakers of the FTX estate would reserve the right to commence court procedures to require the return of payments if recipients did not comply.
Politicians are still unraveling the scandal, especially as Washington commences the congressional session with crypto regulation at the top of the agenda. With Bankman-Fried previously serving as one of the main advocates for a promising bill out of the Senate Agriculture Committee, the crypto industry now appears to lack a champion of equal influence following his arrest.
With FTX’s actions shrouded by a web of shell companies and dark money contributions, the long-awaited move by the debtor association will begin to shed light on the extent of the company’s activity in Washington. Two further hearings in the bankruptcy proceedings are scheduled for later this week, including the possible appointment of an independent examiner.
