(Photo by Alex Wong/Getty Images)
This week saw the charging and arrest of George Santos, the comically inventive Long Island Congressman. Almost unbelievably, Santos is connected to another apparently inveterate liar: Sam Bankman-Fried, the multiply-indicted founder and former CEO of collapsed crypto exchange FTX. Bankman-Fried's ties to Santos were just a footnote to Bankman-Freid's sprawling political influence campaign, seemingly funded in large part with stolen customer funds. The goal of that campaign, however clumsily pursued, may have been the passage of a piece of cryptocurrency legislation, the Digital Commodities Consumer Protection Act, or DCCPA. Many have argued that the DCCPA would have benefitted FTX at the expense of the broader crypto ecosystem – and maybe even allowed Bankman-Fried to keep his gargantuan embezzlement scheme going.
George Santos is believed to have told an array of lies about his biography and resume, including that he's Jewish, a former Broadway producer and both the survivor of an assassination attempt and the son of a 9/11 survivor. But the charges against Santos are serious, and a little sad: he faces 13 criminal counts including money laundering and wire fraud. According to public records uncovered in December, Santos' victims included three figures from the FTX circle. Ryan Salame, CEO of FTX's Bahamian subsidiary FTX Digital Markets, senior exec Clare Watanabe and FTX product head Ramnik Arora all gave the Santos campaign the maximum possible individual donation.
This information was puzzling when it first emerged in late 2022 – Santos had no clear connection to FTX, and no apparent interest in crypto or any other issues Bankman-Fried feigned concern about. According to Puck News, Salame's girlfriend, Michelle Bond, former CEO of the FTX-backed crypto trade group Association for Digital Asset Markets, ran for Congress in 2022 as a MAGA Republican, in a district near Santos'. The FTX executive donations went to Santos as part of an agreement with Bond to "swap" donors who had hit the individual limit for donations to the partner candidate (which Puck said is fairly routine in political campaigns). Salame has not officially been charged any crime.
While not seemingly criminal in its own right, the arcane connection between FTX and George Santos reflects the sprawling nature of Sam Bankman-Fried's larger political influence campaign. In the months since FTX's collapse and Bankman-Fried's arrest, it has become clear that these political efforts were as corrupt as every other aspect of his dealings. The mountain of criminal charges against Bankman-Fried include violating campaign finance laws by allegedly funneling (allegedly stolen) corporate funds through so-called "straw donors," including Salame and FTX co-founder Nishad Singh, to circumvent the law. The straw donor scheme seems to have been intended mainly to disguise the fact that, while positioning himself as the next Democratic mega-donor, Bankman-Fried was in fact funneling donations to both Republicans and Democrats.
But what was Sam Bankman-Fried hoping to gain by spreading so much money around, by such deceptive means? Publicly, Bankman-Fried used his political donations to buttress his carefully-crafted (and admittedly fake) image as a concerned philanthropist. For instance, another seeming middleman for FTX funds was Sam's younger brother Gabe Bankman-Fried, who was placed in charge of a political advocacy nonprofit called Guarding Against Pandemics (GAP). The organization's main source of funding was FTX. GAP's political efforts appear to have been thoroughly hamfisted and ineffectual: it spent unprecedented sums in an Oregon House race, but its candidate lost, and intervened in a Colorado ballot initiative only to alienate parties it was nominally collaborating with. Michelle Bond, meanwhile, lost her House primary race by an embarrassing 20 points.
The combined ineptitude and corruption on display is a revealing parallel to Alameda Research's ability to lose massive amounts of money despite seemingly having a cheat code on FTX. But even if you're incompetent, throwing tens of millions of dollars around clearly counts for a lot in Washington, D.C. Bankman-Fried's donations likely helped him win meetings with the likes of U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler, and invitations to testify before Congress about crypto. Many industry insiders, however, were hostile to the DCCPA legislation that Bankman-Fried helped craft, and which would have imposed onerous and even nonsensical requirements on decentralized finance (DeFi) platforms and services (while possibly benefiting FTX).
As we move closer to Bankman-Fried's scheduled October criminal trial, the theft of customer funds will be a dominant issue for many crypto industry observers. But that's just one part of an even darker allegation: that Bankman-Fried, with help from many allies, used those stolen funds to pervert the legislative process of the United States towards his own entirely self-interested goals.
– David Z. Morris
@davidzmorris
david.morris@coindesk.com
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