FTX’s new management has started the official legal process of clawing back past political donations.
This, as court documents filed in January show that the FTX Debtors committee is reviewing political donations made across the aisle by the bankrupt exchange’s top executives between March 2020 and November 2022. The donations reportedly total up to $93 million.
“To the extent such payments are not returned voluntarily, the FTX Debtors reserve the right to commence actions before the bankruptcy court to require the return of such payments, with interest accruing from the date any action is commenced,” according to a Sunday (Fe. 5) press release announcing the action.
“These recipients are requested to return such funds to the FTX Debtors by February 28, 2023,” the release stated.
According to Open Secrets, a platform dedicated to following money in politics, former FTX CEO and founder Sam Bankman-Fried was the seventh-largest political contributor in 2022 with a total of $40,115,757 donated.
FTX Digital Markets co-CEO Ryan Salame, who reportedly tipped off Bahamian regulators about trouble at the exchange before its collapse, was the 15th largest donor for 2022’s political cycle, with $24,072,450 donated, per Open Secrets’ data.
The announcement follows a Dec. 19 public request for the return of donations, and the threatened specter of legal action underscores the aggressive approach the FTX Debtors are taking to recoup the company’s missing funds, plus interest, in order to repay its lengthy list of creditors.
The recipients of FTX’s political donations are instructed to contact a special email account, FTXrepay@ftx.us, for further information about returning the money before the end of the month.
FTX quickly emerged as a powerful political player as its fortunes soared alongside mainstream global crypto adoption, and Bankman-Fried, along with his colleagues, increasingly sought to influence domestic regulatory oversight of the relatively murky cryptocurrency sector.
Federal Election Commission data shared by investment platform Unusual Whales found that a whopping 196 members of Congress, more than a third of active legislators, accepted campaign contributions linked to FTX. Recipients included Speaker of the House Kevin McCarthy and Senate Majority Leader Chuck Schumer, among many others.
The donations have “cast a pall over proposed legislation tied to the lawmakers who accepted FTX’s money,” as PYMNTS noted last month, including the Digital Commodities Consumer Protection Act (DCCPA), which Bankman-Fried favored.
Derailed in part by FTX’s collapse, Congress failed to pass any crypto-focused legislation at the end of 2022. Bills targeting the industry will need to be reintroduced to the 118th Congress for consideration by lawmakers.
“I was a significant donor in both D and R primaries,” Bankman-Fried tweeted just one week before his cryptocurrency exchange collapsed. “Supporting constructive candidates across the aisle to prevent pandemics and bring a bipartisan climate to DC. And working with them to support permissionless finance.”
1) I was a significant donor in both D and R primaries.
Supporting constructive candidates across the aisle to prevent pandemics and bring a bipartisan climate to DC.
And working with them to support permissionless finance.
— SBF (@SBF_FTX) November 5, 2022
“If you want to contribute crypto, reach out to your elected officials and ask if they accept it; FTX is happy to sign them up!” he added.
Bankman-Fried has since been criminally charged across eight counts, including campaign finance violations, with stealing billions of dollars from FTX’s customers and misleading his investors. The tens of millions of dollars in political donations are being clawed back by the FTX Debtors because they were made using these allegedly stolen funds and were therefore illegitimate.
Bankman-Fried has maintained his innocence in a series of public statements and pleaded not guilty at his arraignment in January of this year. He will face trial in October.
FTX was one of the most valuable crypto unicorns of 2022, with a $32 billion valuation, a sterling reputation, and a roster of A-list celebrity spokespeople promoting its services.
That all came crashing down at the end of last year in one of the crypto industry’s most dramatic implosions to-date.
The Securities and Exchange Commission (SEC) estimated that the crypto exchange’s customers have lost more than $8 billion as a result of its alleged fraud, and an investigation by the FTX Debtors has confirmed substantial shortfalls at both the exchange’s international and U.S. platforms.
“We are making important progress in our efforts to maximize recoveries, and it has taken a Herculean investigative effort from our team to uncover this preliminary information,” said John J. Ray III, the CEO and chief restructuring officer of the FTX Debtors, in a statement.
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