Sam Bankman-Fried, 30, was known to be a big donor to the Democrats.
He was the face of the cryptocurrency industry with whom politicians could appear in front of the cameras.
Known as SBF, the former trader became the crypto king or "the figurehead of a trustworthy and law-abiding segment of the cryptocurrency industry" and a "savior" of the fledgling financial services industry which wants to disrupt traditional finance with the help of blockchain technology.
But according to new court documents unsealed on Feb. 23, his influence, which grew at lightning speed, was due to the fact that he set up an illegal straw donor scheme to flood millions of dollars in donations to both political parties, Democratic and Republican.
Straw Donor Scheme
In a superseding indictment, federal prosecutors accused SBF of using funds from FTX and Alameda Research clients to, among other things, "try to purchase influence over cryptocurrency regulation in Washington, D.C. by steering tens of millions of dollars of illegal campaign contributions to both Democrats and Republicans."
They then claimed that he set up an illegal straw donor scheme. FTX and Alameda were both founded by Bankman-Fried, who filed for Chapter 11 bankruptcy on November 11.
Bankman-Fried spokesman Mark Botnick declined to comment. The former crypto king has pleaded not guilty.
Bankman-Fried allegedly used the FTX customer funds to finance his "unlawful political influence campaign, which involved flooding the political system with tens of millions of dollars in illegal contributions to both Democrats and Republicans, made in the names of others in order to obscure the true source of the money and evade federal election law," the Justice department said.
The former trader, who is free on a $250 million bond, allegedly used two former FTX executives to make the donations. The names of the two executives have not been disclosed. The document identifies them as "CC-1" or "coconspirator 1" and "CC-2" or "coconspirator 2."
But data from the Federal Election Commission (FEC) allow to identify Nishad Singh, ex-FTX director of engineering, as "CC-1," while documents from campaign finance watchdog OpenSecrets show that Ryan Salame, co-CEO of FTX Digital Markets, is "CC-2."
The contributions were made directly to candidates in the names of those FTX executives, but with FTX and Alameda funds, prosecutors alleged. Bankman-Fried used the scheme, prosecutors said, because he "did not want to be known as a left leaning partisan, or to have his name publicly attached to Republican candidates."
Singh, now CC-1, became the face of Bankman-Fried's and FTX's more left-leaning spending. Around 2022, prosecutors alleged that Singh was asked by Bankman-Fried to contribute at least a million dollars to a super PAC that was supporting a candidate running for a United States Congressional seat and appeared to be pro LGBTQ issues.
Singh "expressed discomfort with making the contribution in his name, but agreed there was no one 'trusted at FTX [who was] bi/gay' in a position to make the contribution."
'Woke Shit'
"In general, you being the center left face of our spending will mean you giving to a lot of woke shit for transactional purposes," a political consultant working for Bankman-Fried is said to have told Singh to convince him.
FEC filings show that Singh donated $1.1 million in 2022 to the LGBTQ Victory Fund Federal PAC.
Bankman-Fried didn't want to be publicly branded as donating money to Republicans, court documents show. He decided to keep contributions to Republicans "dark."
Salame, now CC-2, who identifies as a Republican, would, according to prosecutors, make contributions to conservatives for Bankman-Fried. Salame gave $20 million to the Republicans during the 2022 election cycle, according to OpenSecrets.
"The money used to make these political donations originated from Alameda bank accounts, and included funds that had been deposited by FTX customers," the indictment said.
Singh and Salame have not yet been charged with any wrongdoing.
The alleged illegal straw donor scheme was coordinated "through an encrypted, auto-deleting Signal chat called 'Donation Processing.'"
According to court documents, Bankman-Fried and his co-conspirators tried to "conceal" the source of the funds: The contributions "would be transferred from Alameda's bank accounts, which also contained FTX customer funds, to bank accounts in the name of the donors, and then quickly transferred from those individuals' bank accounts to political campaigns."
Donations Recorded as 'Loans' or 'Expenses'
They would go as far as to record "the outgoing wire transfers from Alameda to individuals' bank accounts for purposes of making contributions, as Alameda 'loans' or 'expenses.'"
"These outgoing wire payments were not documented in agreements or on term sheets, and there were no set interest rates, no interest payments, no collateral, and no evidence of repayment. While employees at Alameda generally tracked loans to executives, the transfers to Bankman-Fried, CC-1 , and CC-2 in the months before the 2022 midterm elections were not recorded on internal Alameda tracking spreadsheets," prosecutors alleged.
"Instead, an internal Alameda spreadsheet noted over $100 million in political contributions, even though FEC records reflect no political contributions by Alameda for the 2022 midterm elections to candidates or PACs."
In total, between the fall of 2021 and the November 2022 midterm election, Bankman-Fried, Singh and Salame, who allegedly served as straw donors as part of this scheme, collectively made millions of dollars in contributions, including "hard money" contributions to federal candidates from both major political parties, the indictment asserted.
They made over 300 political contributions, totaling tens of millions of dollars, that were unlawful because they were made in the name of a straw donor or paid for with corporate funds, prosecutors added.
The goal of the alleged straw donor scheme was to allow the former trader "to evade contribution limits on individual donations to candidates to whom he had already donated."
Bankman-Fried "perpetuated his campaign finance scheme at least in part to improve his personal standing in Washington, D.C., increase FTX's profile, and carry favor with candidates that could help pass legislation favorable to FTX or Bankman-Fried's personal agenda, including legislation concerning regulatory oversight over FTX and its industry," prosecutors concluded.
