In just three years, the FTX co-founder built a massive operation to woo politicians, regulators and nonprofits to support his crypto goals.
In May, the founder of a Chicago nonprofit that works with recently incarcerated people got an email from the father of Sam Bankman-Fried, offering to make a donation on behalf of his son’s cryptocurrency exchange.
Soon after FTX pledged to give the nonprofit US$600,000 ($975,000), a consulting firm hired by the exchange blasted the news to members of prominent think tanks, urging them to praise the program publicly on Twitter. At least two email recipients did so.
The money never made its way to the nonprofit, called Equity and Transformation. But the pledge — and its attendant publicity — provides a glimpse into the inner workings of the sprawling influence campaign that Bankman-Fried shaped before it all came to a halt this month when his company was forced to file for bankruptcy, prompting a criminal investigation.
In the three years since Bankman-Fried launched FTX, the company, its executives and its philanthropic arm spent or pledged hundreds of millions of dollars in political and charitable contributions, consulting fees, investments in media outlets and even real estate.
A network of political action committees, nonprofits and consulting firms funded by FTX or its executives worked to court politicians, regulators and others in the policy orbit, with the goal of making Bankman-Fried the authoritative voice of crypto while also shaping regulation for the industry and other causes, according to interviews, email exchanges and an encrypted group chat viewed by The New York Times.
Politicians, advocacy groups and fundraisers are now distancing themselves. Some lawmakers are offloading campaign contributions from Bankman-Fried and his allies by making donations to charity in the same amounts they received. Lawmakers are calling for hearings.
In some ways, FTX followed the playbook of larger and more established corporations that spend years carefully spreading money through the political system to cultivate relationships and build clout. But FTX’s influence operation launched faster and was more frenzied.
It blurred the lines between corporate affairs and political activity and prompted concerns among some involved about whether the money was being spent effectively and in compliance with strict campaign finance laws, while leaving some potential beneficiaries feeling like there was a quid pro quo.
“It was relentless and all-encompassing,” said Dennis Kelleher, the president of Better Markets, a nonprofit that fights for more regulation of financial firms.
When FTX was seeking regulatory approval for some of its activities from the Commodity Futures Trading Commission, a company official asked around about whether a donation would help secure the support of Better Markets, according to Kelleher and a second person with knowledge of the inquiry who did not want to be identified. FTX did not donate to Kelleher’s group.
In an interview Sunday night, Bankman-Fried said he strongly believed in the charitable causes he funded. But he acknowledged that some of his political work around the world was a public relations exercise.
“All people running especially regulated businesses had to spend time thinking of what ribbons we had to place around the business to cloak it in a sense of we-wish-they-could do-gooderism,” Bankman-Fried said. “We all end up playing that same game.”
Bankman-Fried and Ryan Salame, another FTX executive, burst onto the big-money political scene during the 2022 election campaign. As their net worths soared, they established themselves and FTX as influential cross-partisan givers.
To determine where to spend their money, representatives for a newly formed super political action committee operation that received money from FTX executives sent questionnaires to dozens of candidates to assess their stances on cryptocurrency.
In early March, representatives for one super PAC, Web3 Forward, were pleased when the campaign of John Fetterman, the Pennsylvania Senate candidate, returned a completed questionnaire expressing support for the cryptocurrency industry, according to people familiar with the situation.
“Need nothing further from Team Fetterman. Thrilled he is pro crypto,” a consultant for Web3 Forward emailed an ally of Fetterman.
About two months after the email, Web3 Forward began airing an ad casting Fetterman as a working-class champion who was not “gonna get schmoozed by lobbyists.” The super PAC spent nearly US$4.7 million boosting Democratic candidates in the midterm elections, mostly in their primary campaigns, including more than US$212,000 supporting Fetterman, who won his race and is set to begin his term January 3.
Joe Calvello, a spokesperson for Fetterman, sought to distance the newly elected senator from the disgraced crypto entrepreneur. “Sam Bankman-Fried must be held fully accountable,” Calvello wrote in an email.
In a statement, Adam Goldberg, a spokesperson for Web3 Forward, said that neither Bankman-Fried, Salame “nor anyone else at FTX or representing its interests had any role in deciding the candidates we supported.”
But campaign filings show that Web3 Forward received almost all of the roughly US$5.9 million it raised in 2021 from GMI PAC, a super PAC for which Salame was a founding board member. GMI, in turn, received about 32 per cent of its nearly US$11.6 million from Salame, Bankman-Fried and an FTX affiliate.
Goldberg said that although Salame was involved in GMI, not everyone who donated to the super PAC or sat on its board supported FTX’s specific agenda, and in fact some opposed elements of it. Salame resigned from the board of GMI PAC on the day this month that FTX filed for bankruptcy, according to a person familiar with the super PAC.
Salame did not respond to requests for comment.
In the months leading up to the 2022 elections, Bankman-Fried donated about US$40 million to federal campaigns and committees that primarily supported Democrats, according to Federal Election Commission records — including US$27 million to a super PAC called Protect Our Future that said it focused on helping candidates who support pandemic preparedness.
That made him the party’s second biggest single donor behind George Soros, the billionaire financier who has been among the leading funders on the left for decades. Soros is 92, and some Democratic fundraisers had high hopes that Bankman-Fried, 30, could play a similar role financing the left well into the future.
In a podcast interview earlier this year, Bankman-Fried said he expected to spend “north of US$100 million” in the 2024 presidential election.
Republicans also had high hopes for Salame, who donated nearly US$24 million in the 2022 campaign, mostly to Republicans and groups that support them, including US$15 million to a super PAC he launched called American Dream Federal Action. It spent nearly $517,000 supporting the successful Senate campaign of Representative Ted Budd, R-N.C.
Budd was also the beneficiary of more than US$400,000 in spending by a super PAC called Crypto Innovation devoted to helping Republican congressional candidates. Crypto Innovation in turn received US$2.8 million from GMI, the PAC connected to Salame.
Budd did not respond to a request for comment.
A week before Election Day, a group funded by Bankman-Fried and formerly run by his brother, Gabe Bankman-Fried, Guarding Against Pandemics, hosted separate cocktail receptions for Democrats and Republicans at a town house near the Capitol. The group, which focused on pandemic preparedness, paid nearly US$3.3 million in April for the house, where it hosted events. An invitation to the Republican reception hailed Salame as a “budding Republican megadonor.”
Some people in Bankman-Fried’s orbit were worried that FTX and its executives were being sloppy in their political spending, diminishing its effectiveness and potentially courting violations. Those concerns are reflected in messages to an encrypted group chat called “Political FTX comms alignment,” which also reveals a blurry line between FTX and some of the political and advocacy efforts funded by its executives.
An official at Guarding Against Pandemics texted the chat in late October, concerned that a US$500,000 donation to a Democratic Party PAC in Oregon from Nishad Singh, an FTX executive, had been misattributed to a cryptocurrency payment processing firm.
“I don’t want FTX to get less than fully value from the contribution,” the official wrote, asking company executives to confirm “1) whether this is an FTX advocacy contribution, and 2) if so, who it is supposed to be from.”
The official appeared to reference a similar occurrence earlier in the year, when a US$14 million contribution had been listed on FEC filings as having come from the same payment processing firm. It was subsequently reattributed mostly to Bankman-Fried and partly to Singh. The donation to the Oregon PAC was also reclassified to reflect that it was from Singh, according to state campaign finance records.
Singh did not respond to requests for comment.
The shifting filings underscored concerns about crypto money financing political donations, which are tightly regulated by laws that carry stiff penalties for masking the source of funds.
The Oregon Elections Division is investigating the donation as a possible campaign finance violation at the request of Shemia Fagan, Oregon’s secretary of state, according to Ben Morris, a spokesperson. He said that if the agency found sufficient evidence of a criminal violation, it would refer the matter to law enforcement.
To burnish his intellectual profile in public, Bankman-Fried often participated in events to demystify the cryptocurrency industry. On October 12, he sat down for a “fireside chat” with Jason Grumet, the president of the think tank the Bipartisan Policy Center — at Grumet’s invitation — to discuss “recent movements in the crypto market, the role of regulation and the long-term future of the industry.”
Bankman-Fried could be charming in private meetings, disarming his audience with his directness and excitement about crypto, said one person who interacted with him. As he tried to secure a meeting with Gary Gensler, the chair of the Securities and Exchange Commission, he asked J. Christopher Giancarlo, a former chair of the CFTC, for an introduction.
Giancarlo, whose friendly posture toward crypto earned him the nickname “Crypto Dad,” agreed to help. He attended a meeting with Gensler and Bankman-Fried in October 2021.
“He presented FTX with a degree of confidence and expressed integrity,” Giancarlo said. “We now know that was not true, but that’s how he presented it.”
Behind the scenes, Bankman-Fried also held discussions with other regulators, in particular the CFTC, which regulates derivatives trading. FTX officials had numerous meetings with staff of the commission, mostly to talk about FTX’s application for a CFTC license. Larger issues, including how cryptocurrencies should be regulated, also came up, three people briefed on the discussions said.
Rostin Behnam, the chair of the CFTC, and Bankman-Fried agreed that the CFTC, rather than the SEC, should have primary oversight of much of the crypto markets, the people said. That was the broad thrust of a cryptocurrency bill being drafted by Senator Debbie Stabenow, D-Mich., who was Behnam’s former employer.
Staff of the CFTC provided “technical” advice to Stabenow’s staff working on the bill, called the Digital Commodities Consumer Protection Act, said Steven Adamske, a commission spokesperson.
FTX representatives, including Mark Wetjen, its head of government affairs and a former CFTC commissioner, also gave their input.
Adamske said that the technical assistance and legal analysis his organization provided to Congress “came solely from the CFTC.”
Matt Williams, a spokesperson for Stabenow, said no single stakeholder, including FTX, had “significant input” into the bill. “In fact, none of the substantial changes FTX requested were included in the legislation.”
Bankman-Fried gave US$20,800 to the Stabenow Victory Fund.
In late July, when the bill was unveiled, Behnam’s chief of staff wrote to the offices of the four other commissioners — two Republicans and two Democrats — asking them to release a joint statement praising the legislation. When they did not all agree to do so, Behnam, a Democrat, released a statement on his own.
Christy Goldsmith-Romero, one of the Democratic commissioners, said she did not issue a statement because she wanted to study the legislation and “decide what I thought.”
Even as Bankman-Fried focused on politicians and regulators, his father, Joseph Bankman, appeared to be more involved in promoting his son’s ideas for charity and social change.
In addition to connecting with Equity and Transformation, the Chicago nonprofit, Bankman identified programs designed to increase financial inclusion and close the racial wealth gap that he thought Bankman-Fried should donate to.
Bankman, a professor at Stanford Law School, also sought to connect his son with his friends in academia whose research focused on racial equality and financial inclusion. Bankman hoped his colleagues would support his beliefs that cryptocurrencies could help equalize access to the financial system.
“I did reach out to others who share my interest in financial inclusion to explore the role that crypto might play,” Bankman said in a phone interview Monday.
On November 11, the day FTX filed for bankruptcy, Bankman wrote to Richard Wallace, the executive director of the Chicago nonprofit, to express his sadness that the US$600,000 donation wouldn’t come through. The staff of the FTX Foundation, the exchange’s philanthropic arm, had resigned, and its funds had evaporated.
The donation, which had been promised in June and would have paid for a guaranteed income program for recently incarcerated people and their families, was set to begin Thursday.
“I’m heartbroken, as you can imagine, about what’s happening and heartbroken about the loss of our project,” Bankman wrote to Wallace. He said he would have funded half the project out of his own pocket had the FTX Foundation been able to put in the other half.
Funding the entire US$600,000 by himself was out of the question, Bankman added. “I’ll be spending substantially all of my resources on Sam’s defence.”
This article originally appeared in The New York Times.
Written by: Kenneth P. Vogel, Emily Flitter and David Yaffe-Bellany
Photographs by: Tamir Kalifa, Kriston Jae Bethel, Erika P. Rodriguez, Hailey Sadler, Shuran Huang, and Greg Kahn
©2022 THE NEW YORK TIMES