Opinion | Sam Bankman-Fried’s Dirty Political Donations

Opinion | Sam Bankman-Fried’s Dirty Political Donations

Celebrity crypto savant

Sam Bankman-Fried

is in a heap of trouble. The FTX founder was arrested this week on federal fraud charges. But he can’t be the only one sweating. Washington has its own giant FTX problem, in what now appears to be millions of dollars in dirty donations. It’s a donor scandal for the ages, and yet politicians are mum on what they intend to do about it.

The country is learning more about FTX’s spectacular collapse, including the allegation that SBF stole billions from customers to prop up a side venture, Alameda Research. But the Beltway zinger can be found in a civil complaint from the Securities and Exchange Commission. The SEC explains that FTX customer funds were diverted to Alameda to the extent that there was “no meaningful distinction,” and that SBF then used these “commingled FTX customers’ funds” to make “large political donations.” Put simply, SBF stands accused of using stolen money to fuel politics.

And not little donations. According to OpenSecrets, SBF came in as the sixth-largest donor overall in this midterm cycle, and the second-largest donor to Democrats. Only

George Soros

gave more. SBF dumped close to $40 million into political-action committees, outside groups and individuals.

That’s not all. Individuals associated with FTX and its affiliates contributed some $70 million this cycle. They include executives

Ryan Salame

(at $20 million, the 14th-largest donor this cycle) and

Nishad Singh

($8 million, 31st-largest). Given that both received sizable loans from Alameda, it’s possible all the FTX political donations are criminally tainted.

The complaint suggests those donations were made at the expense of thousands of FTX customers—including smaller investors—who are now at risk of not getting their money back. The SEC says that among other things it wants a “disgorgement” of SBF’s “ill-gotten gains.” The natural follow-on question: When will political outfits return their ill-gotten donations to aid in compensation?

Some of the money is gone forever. A sizable portion of SBF’s political spending (some $28 million) went into his own hybrid committee, the Protect Our Future PAC, which played in Democratic primaries. Who knows how different the political landscape might look now if these funds hadn’t been tipping the scales in races. Good thing Washington remains obsessed with Russian meddling in elections.

SBF gave money to 50 Democratic House and Senate candidates and eight Republicans, and several have already announced they’ll direct their donations to charity. But dumping cash into a lefty charity hardly helps to make FTX customers whole.

As for the recipients of large donations, don’t expect a rush to write checks given the sheer numbers involved. SBF donated $6 million to the House Majority PAC, an outside group affiliated with Speaker

Nancy Pelosi.

That was one of the largest donations this cycle to that entity—which, according its most recent federal disclosure report, has $490,000 in cash on hand.

FTX execs gave an additional $3 million to the Senate Majority PAC, $2.25 million to Women Vote! and more than $1 million to the LGBTQ Victory Fund. There were also donations to the Democratic National Committee, the Democratic House and Senate campaign funds, and state Democratic parties. And that’s only this cycle. SBF in 2020 gave more than $5 million to the elect-Biden effort.

Not that Republicans aren’t also in the hot seat. While SBF’s declared donations are primarily to Democrats, Mr. Salame turned up this cycle as a GOP megadonor. Much of his money (at least $13 million) also went into his own vehicle—American Dream Federal Action—which engaged in GOP primaries. Again, that’s gone. There’s also $2 million to the GOP’s Congressional Leadership Fund, $2.5 million to its Senate Leadership Fund, and additional money to GOP candidates, state parties and outside groups. SBF recently suggested he made his own sizable, undeclared donations to Republican-affiliated groups.

The media has reported some details, and a few are now starting to ask recipients what they intend to do about the political liability. Remarkably, top political outfits are stonewalling. While the court case will lay out more of the technicalities of commingling, that’s now almost beside the point—FTX is already toxic. And Washington already has egg on its face, given revelations about FTX lobbying on potential crypto regulation.

Political outfits can fairly claim they didn’t know about FTX indiscretions when they accepted the donations (even if there may be a lesson here in the wisdom of banking sums from overnight billionaires). Still, they know now. Time to explain how they plan to make it right.

Write to kim@wsj.com.

Wonder Land: The FTX founder has given effective altruism a bad name. That doesn’t mean it’s a bad idea. Images: FTX/Reuters/WSJ/Storyblocks Composite: Mark Kelly

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