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 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 companys success came from its prodigious lobbying efforts in Washington, which took the form of both donations and frequent visits to the capital 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 last 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 FTXs collapse, numerous politicians who received donations from FTX and its employees tried to distance themselves from the company, 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 FTXwhether in the form of political donations or venture fundingto send the funds back to be distributed among the estates 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-Frieds 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 Sundays press release from FTX was sparse and did not mention who it considered being part of the companys umbrella, instead instructing parties to receive 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 it added that it would reserve the right to commence court procedures to require the return of the 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 FTXs actions shrouded by a web of shell companies and dark money contributions, the long-awaited action by the debtor association will begin to shed light on the extent of the companys activity in Washington. Two further hearings in the bankruptcy proceedings are scheduled for later this week, including the possible appointment of an independent examiner.
Learn how to navigate and strengthen trust in your business with The Trust Factor, a weekly newsletter examining what leaders need to succeed. Sign up here.
