Campaign Finance Violation Charge Dropped for Bankman-Fried

Photo Credit: Amr Alfiky/Reuters

A new turn of events in the saga of Sam Bankman-Fried of the now bankrupt crypto exchange FTX indicates that the founder will not be charged with campaign finance violations. Mr. Bankman-Fried was charged with fraud and campaign finance violations in December after the sudden collapse of his company, the cryptocurrency exchange FTX. He was quickly extradited to the United States from the Bahamas, where FTX was based.

The authorities have said Mr. Bankman-Fried and others at FTX used customer deposits to make $90 million in campaign contributions to some 300 political candidates or Political Action Committees (PACs).

Before FTX’s severe demise, Bankman-Fried was well known for his support of the Democratic Party. The biggest single recipient during the 2020 presidential election was Protect Our Future, a PAC that aims to “help elect candidates who will be champions for pandemic prevention.”

The majority of Bankman-Fried’s donations were traced to Democrats, but he also claimed in an interview with reporter Tiffany Fong that he donated “about the same amount” to the Republican Party as well. “That was not generally known,” he added.

“All my Republication donations were dark,” Bankman-Fried said in the interview two months ago, explaining that the donations were not publicly disclosed through official filings. “The reason was not for regulatory reasons, it was because reporters freak the fuck out if you donate to Republicans. They’re all super liberal and I didn’t want to have that fight.”

Regardless of the weight of the charges, prosecutors said the Bahamas had informed them that the nation’s government had not intended to extradite Mr. Bankman-Fried on the campaign finance charge.

Bankman-Fried still faces seven charges in October from the original indictment filed last year, however six of thirteen charges in total have been dropped.

FTX’s collapse took place over a swift 10-day period in November 2022. The catalyst was a Nov. 2 scoop by crypto news site CoinDesk that revealed that Alameda Research, the quantitative trading firm also run by Bankman-Fried, held a position valued at $5 billion in FTT, the native token of FTX.

The report disclosed that Alameda’s investment foundation was also in FTT, the token that its sister company had invented, not a fiat currency or other cryptocurrency. That prompted concerns of overvaluation across the cryptocurrency industry. Concerns regarding Bankman-Fried’s companies’ undisclosed leverage and solvency.

After FTX folded, Bankman-Fried resigned as CEO of FTX. On November 11 he was replaced, unironically, by John J. Ray III, known for his role in the bankruptcy and restructuring of Enron.

With Bankman-Fried’s seven charges at hand and fiduciary deceit only paralleled by the Enron scandal itself, this is a huge win for Bankman-Fried and his legal team who stated that the United States mishandled the extradition process.

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