Former cryptocurrency billionaire Sam Bankman-Fried sought to court the favor of Democrats during the 2022 midterm election cycle by making massive donations.
His political action committee gave over $23 million to the Democratic Party while the 30-year old founder of the now-insolvent crypto brokerage FTX gave $13 million personally to both the Democrats and Republicans.
Even Ryan Salame, who served as co-CEO of FTX Digital Markets, and worked alongside Bankman-Fried, donated nearly $24 million to the Republican Party and over $12 million from his PAC.
Bankman-Fried's donations to politicians are a headache for Democrats. Senators Elizabeth Warren and Dick Durbin, both Democrats, want documentation from the founder of the bankrupt company to demonstrate the collapse of the company.
The lawmakers call for a “complete and transparent accounting” of the business dealings of FTX and its hedge fund, Alameda Research.
“New revelations continue to shed light on what now appears to be an appalling case of greed and deception,” Warren and Durbin wrote in the letter to Bankman-Fried and FTX's new CEO John J. Ray III who is overseeing its bankruptcy proceedings.
Bankman-Fried, who is also known as "SBF," is being asked to turn over the balance sheets of FTX and its subsidiaries, said Warren and Durbin, the No. 2 Senate Democrat and chairman of the Judiciary Committee.
Both senators are critical of the crypto industry and said the operations at the exchange are “disturbing allegations…about the company’s fraudulent and illicit practices.”
FTX has been alleged to have misused client funds when it executed orders for their clients, taking their cash and buying cryptocurrencies on their behalf. FTX acted as a custodian, holding the clients’ crypto currencies.
The company used its clients’ crypto assets, through its sister company’s Alameda Research trading arm, to generate cash through borrowing or market making. The cash FTX borrowed was used to bail out other crypto institutions in the summer of 2022.
Now both Bankman-Fried and and Alameda Research are under criminal investigation by the Department of Justice and the U.S. Securities and Exchange Commission.
A letter from the senators seeks answers to the transfers between FTX and Alameda Research
“Billions of dollars worth of investor funds seem to have disappeared into the ether,” Warren and Durbin wrote. “These massive losses raise questions about the behavior of” Bankman-Fried and the company's executives.
The House Financial Services Committee said on Nov. 16 it will hold a hearing in December to examine the meltown of FTX and expects Bankman-Fried to tesitfy.
The senators said Bankman-Fried must turn in the documents by Nov. 28, which include “complete copies of all” the balance sheets of FTX and its subsidiaries from 2019 until 2022.
No Paperwork
But the documentation that the Democrats want may not even exist.
John Ray, who is in charge of restructuring FTX, gave a scathing description in a 30-page document filed with the United States Bankruptcy Court for the District of Delaware that was made public on Nov. 17.
He described a company whose practices seem surreal, breaking all conventional business practices.
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," Ray wrote. "From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented."
Ray was the liquidator of Enron, the broker whose collapse remains one of the biggest financial fiascos of modern times.
Bankman-Fried considered the funds of one of his companies to be his personal bank. Employees dipped into company money to buy homes in the Bahamas and none of these transactions were recorded anywhere.
There may even have been fictitious employees. The board of directors, which is supposed to rein in everyone's instincts and behavior, never met.
The regime of Bankman-Fried and his two associates -- Zixiao "Gary" Wang and Nishad Singh -- failed on several levels.
"Many of the companies in the FTX Group, especially those organized in Antigua and the Bahamas, did not have appropriate corporate governance. I understand that many entities, for example, never had board meetings," Ray blasted in the court filings.
The Democrats have been criticized by another famous billionaire, Elon Musk, who runs Twitter and Tesla.
The party seeks to tax the rich more, whom they accuse of not paying enough taxes. Their criticism of Musk increased tenfold after the world's richest man announced he would vote Republican in the midterm elections.
'Bernie Madoff of Crypto'
Now he, FTX and Alameda Research are under criminal investigation by the Department of Justice and the U.S. Securities and Exchange Commission.
Although Bankman-Fried has been dubbed the "Bernie Madoff of crypto," he continues to seek attention by tweeting his concerns about financial regulators and speaking to a reporter at Vox.
His attempts at controlling the narrative may only prove to give regulators more evidence as the company undergoes the bankruptcy process that was started when he filed for Chapter 11 protection on Nov. 11.
Bankman-Fried despises regulators, which his critics might find to be ironic.
He has sought supporters even though it appears that the money that hundreds of thousands of customers put into the platform are not likely to be recouped even though the company's assets will be sold.
Bankman-Fried sent several direct messages via Twitter to Kelsey Piper, a reporter at Vox, who had met him initially via Zoom during the summer when she wrote a profile about him.
Piper reached out to him via Twitter on Nov. 13 and he responded by taunting regulators by stating "F--- regulators.”
He had never criticized them before unlike his main rival, Changpeng Zhao, the founder of Binance, who had attempted to salvage the company by acquiring it, but quickly backed out of the deal less than 24 hours later.
In another twist of irony, Bankman-Fried had spent time in Washington lobbying for more regulations for crypto, which are digital assets that have gained market capitalization and attention from retail investors.
