Bankman-Fried prosecutors allege plan to shape crypto policy

by Arthur · February 26, 2023

(Bloomberg) — A new indictment against FTX co-founder Sam Bankman-Fried features a pair of co-conspirators who the United States says helped illegally influence cryptocurrency regulation by donating millions of dollars to both Democrats and Republicans.

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Bankman-Fried is accused of a massive fraud that led to last year’s implosion of the crypto exchange. The new charges, unsealed Thursday in federal court in Manhattan, refer to two people the government says participated in the alleged campaign finance scheme. The campaign cash from him and other top FTX executives, which prosecutors say “involved flooding the political system with tens of millions of dollars in illegal contributions,” has the potential to become the largest infusion of illegal money into American politics in decades.

Read more: FTX Campaign Cash stands out in DC among efforts to make an impact

In addition to Bankman-Fried, Ryan Salame, former CEO of FTX Digital Markets, and Nishad Singh, FTX’s former director of engineering, were among the largest political donors in the FTX universe. Together, they gave $70.5 million in the 2022 midterm elections. Bankman-Fried previously donated $5.6 million in the election cycle.

The US did not identify co-conspirators, or cite Salame or Singh in the indictment, nor have they been charged. Attorneys for both did not return calls and emails seeking comment. A spokesman for Bankman-Fried declined to comment.

Beyond Bankman-Fried’s own fate, there are dozens of candidates and political committees who received the donations. The charges could drag a host of Republicans and Democrats, super PACs and other fundraising groups into complicated legal proceedings and force them to pay back the money, with interest, just as they work to raise funds for the 2024 presidential election. .

The new indictment provides a much more detailed account of the government’s case against the 30-year-old entrepreneur, who has pleaded not guilty and will stand trial in October. It outlines in specific detail how he allegedly misappropriated billions of dollars of customer deposits and used them to support his empire – to make speculative investments, donate to charity, try to influence cryptopolitics in Washington and enrich himself along the way.

Under pressure

It includes charges of bank fraud, money transfer offenses and asset forfeiture claims. According to the government, the assets — which Bankman-Fried said last year in interviews he did not have — include those held in Binance accounts and more than 55 million shares of Robinhood Markets, a commission-free investing and trading app. .

The US says it also includes more than $170 million in cash previously held at Silvergate Bank and $50 million in deposits at Farmington Bank, in which Alameda had a minority interest.

“We are working hard and will remain so until justice is served,” Damian Williams, U.S. attorney for the Southern District of New York, said in a statement.

The pressure on Bankman-Fried is increasing. Singh has taken a plea deal with prosecutors as they prepare to file fraud charges against him, according to people familiar with the matter. Gary Wang, who co-founded FTX with Bankman-Fried and was its chief coder, and Caroline Ellison, who was the managing director of trading affiliate Alameda Research and Bankman-Fried’s on-again, off-again romantic partner, have already pleaded guilty in the wide-ranging the case and is cooperating with the government against him. Both were named in the new indictment, separately from the two co-conspirators.

Read more: Top Bankman-Fried Associate Nears Plea Deal in US Probe of FTX

Beginning around March 2022, Bankman-Fried and others began coordinating political contributions made using FTX and Alameda funds through an encrypted, auto-deleting Signalchat called Donation Processing, according to the indictment.

‘Much Woke S——’

One example prosecutors gave involved a plan to contribute at least $1 million to a political action committee supporting a congressional candidate championing LGBTQ rights. A political consultant asked a co-conspirator to make the contribution, saying “generally, you being center-left on our spending means you’re giving to a lot of vigilante s– for transactional purposes,” according to the indictment, which uses the entire word.

Read the new indictment here

Campaign finance records show Singh donated $1.1 million to the LGBTQ Victory Fund Federal PAC in July. The team overseeing FTX’s bankruptcy has recently asked political candidates, committees and charities that received donations from FTX executives to repay the money.

Prosecutors allege that Bankman-Fried and the alleged co-conspirators made more than 300 illegal political donations in the tens of millions of dollars, using straw donors or corporate funds. Bankman-Fried carried out the operation in part to “enhance his personal standing in Washington, DC, raise FTX’s profile and curry favor with candidates who could help pass” favorable legislation, according to the revised indictment.

He did not want to be labeled a left-wing partisan, or be associated with the right, so he used others to make the contributions, prosecutors say. A co-conspirator became one of the largest Democratic donors in the midterms and made donations “to advance Bankman-Fried’s agenda” that he would not have otherwise given, according to the new, 39-page indictment — nearly three times as long as December’s indictment and including four new points and a lot of details.

Santos too

The indictment gives some hints about the identity of the co-conspirators. In one instance, Bankman-Fried directed an unnamed individual to make a $107,000 donation to the New York State Democratic Committee. Singh was the only donor to give this amount to the group in the last election cycle.

The straw donations would have allowed Bankman-Fried to play both sides in some of the most competitive midterm races in 2022. In Senate races, FTX leaders supported both Democrat Catherine Cortez Masto and Republican Adam Laxalt in Nevada, Democrat John Fetterman and Republican Mehmet Oz in Pennsylvania, and both Tim Ryan and JD Vance in Ohio.

Read more: Hamptons donors funded Santos with cryptocurrency before crash

Among the candidates Salame supported was George Santos, then a little-known Republican from Long Island who has since become a household name for lying about important parts of his background. Salame, who was romantically involved with Republican congressional candidate Michelle Bond, also helped introduce donors to Santos — including his parents and other FTX executives.

Bankman-Fried was charged in December with eight criminal counts, including wire fraud, for allegedly misappropriating billions of dollars in customer funds before the spectacular collapse of FTX. That indictment followed weeks of speculation that he would end up in handcuffs after his company — one of the largest crypto exchanges in the world — entered bankruptcy court.

The case is US v. Bankman-Fried, 22-cr-673, US District Court, Southern District of New York (Manhattan).

Read more: Sam Bankman-Fried accused by US of fraud over FTX collapse

–With assistance from Olga Kharif, Allyson Versprille, Gregory Korte and Chris Dolmetsch.

(Adds details, context and analysis of the campaign donations throughout.)