WASHINGTON — Two super PACs associated with disgraced cryptocurrency tycoon Samuel Bankman-Fried pumped more than $2.7 million into a Dallas congressional race, helping Democrat Jasmine Crockett top a crowded primary field and coast to election last month.
With the former CEO of crypto exchange FTX now charged with defrauding customers and investors – and violating campaign finance law – Crockett and other beneficiaries of his lavish political outlays this year face public pressure to distance themselves from SBF, as he is widely known.
The freshman-elect, a member of the Texas House, was endorsed by retiring Rep. Eddie Bernice Johnson as her successor in the deep-blue 30th district.
During the primary, rival Jane Hamilton, a former chief of staff for U.S. Rep. Marc Veasey, D-Fort Worth, attacked Crockett over the crypto super PAC support.
Bankman-Fried and his brother Gabriel each donated $2,900 directly to Crockett’s campaign.
Two related committees spent far more on her behalf, paying for a barrage of advertising and direct mail:
— Protect Our Future PAC, bankrolled by Bankman-Fried, spent more than $1.4 million supporting Crockett.
— Web3 Forward, which received millions from GMI PAC, Inc., spent more than $1.3 million on her behalf. GMI PAC, Inc., had received millions from Bankman-Fried and another top FTX executive, Ryan Salame.
Crockett did not respond this week to a request for comment.
During the primary, she responded to Hamilton’s attacks by pointing out the groups did not give the money directly to her and by law they could not coordinate their activities with her.
She said at the time she did not know Protect Our Future was controlled by crypto financiers until she read it in The Dallas Morning News.
Bankman-Fried is accused of diverting FTX funds into sister company Alameda Research, and funneling millions of dollars into political contributions to federal candidates and committees.
Prosecutors say he tried to evade contribution limits and hide the fact donations came from corporate funds by having them reported in the names of others.
“We allege that the defendant conspired to defraud customers by misappropriating their deposits; to defraud lenders; to commit securities fraud and money laundering; and to violate campaign finance laws,” U.S. Attorney General Merrick Garland said this week.
It’s not clear which candidates received the allegedly illegal donations, but a number of Texans from both parties received direct contributions from FTX executives that were reported through normal channels to the Federal Election Commission.
Rep. Henry Cuellar, D-Laredo, did not receive a direct contribution from Bankman-Fried but America United, backed by the FTX boss, spent more than $240,000 on independent expenditures supporting Cuellar.
Cuellar’s Republican opponent in the general election, Cassy Garcia, received a $1,000 donation from Salame.
Overall, Bankman-Fried, Salame and FTX Director of Engineering Nishad Singh poured at least $70.1 million into the 2022 midterm elections, according to the nonpartisan Open Secrets.
That includes about $40 million in reported contributions by Bankman-Fried that went overwhelmingly to Democrats, and about $23 million in reported contributions by Salame, who primarily gave to Republicans.
For what it’s worth, Bankman-Fried has said he donated to both parties but that he used “dark money” to make his donations to Republicans, meaning they were provided in ways not visible to the public.
Cal Jillson, professor of political science at Southern Methodist University, highlighted how the reported donations of Bankman-Fried and Salame show they were funding both sides of the intense midterm election battles.
It’s common for senior corporate executives to spread campaign contributions around, Jillson said, and suggested the split is not necessarily indicative of political differences between the pair.
“It isn’t that Bankman-Fried is a Democrat and Salame is a Republican,” Jillson said. “It’s that they were covering all their bases with significant contributions to both parties to keep the door open so they could make their case for the lightest possible regulation of crypto.”
In high-profile financial scandals, politicians who took donations from those involved face public scrutiny and pressure to give up tainted money that flowed from the malfeasance into their campaign coffers.
“It is very difficult to pry the hands of politicians off of these checks, but once they come to understand that they’re going to take a beating if they keep this money, there are two possibilities — you give it back or you give it to charity,” Jillson said. “In this case, giving it to charity is the obvious route to take because giving it back to crooks isn’t going to play that well either.”
Rep.-elect Greg Casar, D-Austin, received $3,900 in campaign contributions from Gabriel Bankman-Fried and $2,900 from Singh.
Casar’s campaign said in a statement it would be donating that $6,800 to the left-leaning advocacy group Fight Corporate Monopolies.
Contributions to Republicans
Across the aisle, Salame made donations of $2,900 each to Republican Reps. Michael Burgess, John Carter, Dan Crenshaw, Tony Gonzales, Kay Granger and Ronny Jackson.
He also gave $10,000 to a Jackson-affiliated joint fundraising committee and $1,000 to Republican Rep.-elect Monica De La Cruz.
A number of the Texas lawmakers who received donations did not respond to requests for comment about the scandal or whether they planned to return the money.
Crenshaw aide Justin Discigil said in a statement the congressman receives donations from “thousands upon thousands” of people.
“We can’t do a background check on everyone or assess their networks or affiliations,” Discigil said. “It’s ridiculous to think so. And return the donation? You’re suggesting we write a check to someone affiliated with FTX? No.”
Carter’s campaign plans to give the Salame donation to the Texas Baptist Children’s Home. Granger’s campaign also is looking to give the money away, either to an entity benefitting victims of the FTX meltdown or to a local charity.
Democrat Beto O’Rourke’s unsuccessful campaign for Texas governor said in a statement it returned an unsolicited $1 million donation from Bankman-Fried before news broke about the FTX scandal. O’Rourke also received a $100,000 contribution from Singh. The campaign did not say in the statement whether it returned that donation.
When FTX started encountering serious issues, some Republicans sought to make political hay out of Bankman-Fried’s well-known, high-profile support of President Joe Biden and other Democrats.
Sen. Ted Cruz, R-Texas, said on his Nov. 21 podcast that evidence was mounting Bankman-Fried had engaged in fraud.
“He in turn invested quite wisely in supporting Democrat politicians who would essentially greenwash what he’s doing,” Cruz said on the podcast.
Cruz pointed out that Sam Bankman-Fried was the second largest political contributor to Democrats in the 2022 midterms – behind only megadonor George Soros – and cited the millions directed to Biden’s campaign.
If Democrats fail to turn that money over to FTX victims they are “complicit” in the fraud that ultimately robbed “little old ladies” of their savings, Cruz said.
Asked about FTX executives’ donations to Republicans this week, Cruz aides just referred back to his previous comments on the podcast.
White House Press Secretary Karine Jean-Pierre was pressed earlier this week about the president’s reaction to the Bankman-Fried charges, as well as the donations to Biden and other Democrats.
Jean-Pierre sought to deflect those questions by referring them to the Democratic National Committee, which did not respond to a request for comment.
It remains to be seen how far the scandal will spread and how it might affect proposals on Capitol Hill to rein in crypto currencies through federal regulation.
Sen. Elizabeth Warren, D-Mass., said Wednesday she was introducing legislation intended to close loopholes that allow digital assets to be used for money laundering.
Asked about the role of crypto-related political donations and whether lawmakers should give away those tied to FTX, Warren instead emphasized the need for federal action.
“What matters is that we put tough regulations in place,” Warren said. “Crypto has been trying to buy influence around here for a long time. It’s time for Congress to stand up and say ‘no sale.’”
