FTX CEO Sam Bankman-Fried was recently indicted for violating campaign finance laws following his recent arrest in the Bahamas for wire fraud, securities fraud and money laundering. He was also charged with defrauding equity investors by the Securities and Exchange Commission, with SEC Chair Gary Gensler saying in a statement, "Sam Bankman-Fried built a house of cards on a foundation of deception while telling investors that it was one of the safest buildings in crypto."
The campaign finance scandal being exposed is enormous, and the unabashed influence peddling that Bankman-Fried and his executives engaged in as they attempted to influence policy over the cryptocurrency industry is both embarrassing and hugely problematic for the many politicians that received the money. But so far, little attention has been paid to the systemic flaws that enabled the unbridled pay-for-play scheme that we've seen unfold in recent weeks.
The FTX scandal shows that it's finally time to reckon with the disastrous Supreme Court ruling Citizens United v. FEC, which allowed unlimited political giving by corporations and wealthy individuals as "free speech" and paved the way for unlimited "dark money" in our politics.
While prosecutors allege that Bankman-Fried's political contributions were illegal, businesses and billionaires have legally been giving in secret for years in order to hide their more distasteful and self-interested attempts at political influence. The Citizens United decision gave corporations and billionaires free rein to spend unlimited secret money to influence policy and our elections. In the 2020 election cycle alone, more than $1 billion in undisclosed funds was spent at the federal level. This secret giving has proven disastrous for democracy: For example, secret money front groups spent millions of dollars to hold and promote the rally outside the Capitol on Jan. 6, 2021, which turned into an attempted insurrection that aimed to overturn the 2020 election.
In Bankman-Fried's case, he played in politics to bolster a false claim of safety for investors. He wanted to insulate his company by ensuring that government regulation was light, and spent money liberally in a blatant effort to exert influence. Since the collapse of FTX, he has admitted that he purposely used secret money channels for gifts to Republicans and made the others public.
Bankman-Fried stated that "all my Republican donations were dark," meaning those political donations were not publicly disclosed. This interesting admission of "dark" Republican donations serves to illustrate the large and dangerous threat that undisclosed campaign money poses to our elections and politics.
Secret political spending also allows mega-donors like Bankman-Fried to influence lawmakers to favor their corporate interests and priorities in Washington while avoiding accountability. In Bankman-Fried's case, FTX donated to a slew of Republican super PACs just before the 2022 election. Without Bankman-Fried's recent admission to the press, there would be no way to know about the money he spent in secret to back Republicans.
Undisclosed political donations not only keep shareholders and consumers in the dark about how companies are influencing our elections, they also block progress on the big issues that matter to all of us, from gun safety to our environment to public health.
Beyond the clear moral imperative that we take action to stop the flow of secret money into our politics, it's straight up bad for business. Research conducted by Freedom House and the World Bank demonstrates that stable, transparent governments are the ideal environment to establish private businesses and help ensure fair regulations, while oppressive regimes typically impose more barriers that limit the power of the free market.
Moreover, polling shows that across party lines people prefer to work at and buy from companies that promote democracy, act transparently and fight for our freedom to vote. When corporations stand up to strengthen democracy, every single American has a better chance of gaining equal access to the ballot box, no matter their background.
While both major political parties receive political money in secret, Democrats have tried to pass legislation that would bring this secret political spending into the light. They have been met with Republican obstruction at every turn, including in September when Senate Republicans wouldn't even allow debate on the DISCLOSE Act, which would help curtail secret money.
In the new Republican Congress the chance of passing disclosure legislation is low, and so the Biden administration must take action. The White House should do what it can to move the needle on transparency by requiring large government contractors to disclose their political spending. This will impact a large number of Fortune 100 companies who play in politics and help put a dent in the corrupt secret spending culture that Sam Bankman-Fried embodies.
