The FTX Collapse: Bankman-Fried and Its Ties to the Democrats

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dated: 2022-11-19 21:14:31 .

Former cryptocurrency billionaire Sam Bankman-Fried tried to woo Democrats with massive donations during the 2022 midterm election cycle.

His political action committee gave more than $23 million to the Democratic Party, while the 30-year-old founder of now-bankrupt crypto broker FTX personally donated $13 million to both Democrats and Republicans.

Even Ryan Salame, who was co-CEO of FTX Digital Markets and worked with Bankman-Fried, donated nearly $24 million to the Republican Party and more than $12 million from his PAC.

Bankman-Fried’s donations to politicians are giving Democrats headaches. Senators Elizabeth Warren and Dick Durbin, both Democrats, want documents from the founders of the bankrupt company to prove the company’s demise.

Lawmakers are demanding a “full and transparent accounting” of the operations of FTX and its hedge fund Alameda Research.

“The new revelations continue to shed light on what appears to be a horrific case of greed and fraud,” Warren and Durbin wrote in a letter to Bankman-Fried and FTX’s new CEO, John J. Ray III, who is overseeing the bankruptcy proceedings.

Bankman-Fried, also known as “SBF,” is being asked to provide the accounts of FTX and its subsidiaries, said Warren and Durbin, the other Senate Democrat and chairman of the Judiciary Committee.

Both senators have been critical of the crypto industry, saying the exchange’s operations are “troubling allegations … of the company’s fraudulent and illegal practices.”

FTX was accused of misusing client funds when it filled orders for its clients, took their cash and bought cryptocurrencies on their behalf. FTX acted as a custodian and kept the clients’ cryptocurrencies safe.

The firm leveraged its clients’ crypto assets through the trading arm of its sister company Alameda Research to generate cash through borrowing or market making. FTX’s borrowed money was used to bail out other crypto institutions in the summer of 2022.

Both Bankman-Fried and Alameda Research are now under criminal investigation by the Department of Justice and the US Securities and Exchange Commission.

The senator’s letter seeks answers about the transfers between FTX and Alameda Research

“Billions of dollars worth of investor funds appear to have vanished into thin air,” Warren and Durbin wrote. “These huge losses raise questions about the conduct” of Bankman-Fried and the company’s executives.

The House Financial Services Committee said on November 16 that it would hold a hearing in December to investigate the FTX collapse and expects Bankman-Fried to testify.

The senators said Bankman-Fried must submit the documents by Nov. 28, which include “full copies of all” balance sheets of FTX and its subsidiaries from 2019 to 2022.

No paperwork

But the documentation Democrats want may not even exist.

John Ray, who is responsible for restructuring FTX, provided a stark description in a 30-page document filed in the United States Bankruptcy Court for the District of Delaware and published on November 17.

He described a company whose practices seem surreal and violate all conventional business practices.

“Never in my career have I seen such a complete failure of corporate controls and a complete lack of reliable financial information,” Ray wrote. “From compromised system integrity and deficient regulatory oversight overseas, to the concentration of control in the hands of a very small group of inexperienced, inexperienced and potentially vulnerable individuals, this situation is unprecedented.”

Ray was the liquidator of Enron, the brokerage whose collapse is one of the greatest financial fiascos of modern times.

Bankman-Fried viewed the assets of one of his companies as his personal bank. Employees used company funds to purchase homes in the Bahamas, and none of these transactions were recorded anywhere.

There may even have been fictitious employees. The committee, charged with controlling everyone’s instincts and behavior, never met.

The regime of Bankman-Fried and its two allies – Zixiao “Gary” Wang and Nishad Singh – has failed on several levels.

“Many of the FTX Group companies, especially those organized in Antigua and the Bahamas, did not have proper corporate governance. I understand that many companies, for example, have never held board meetings,” Ray said in court filings.

Democrats were criticized by another famous billionaire, Elon Musk, who runs Twitter and Tesla.

The party is trying to tax the rich even more, whom it accuses of not paying enough taxes. Her 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 US Securities and Exchange Commission.

Despite being called the “Bernie Madoff of crypto,” Bankman-Fried continues to garner attention by tweeting his concerns about financial regulators and speaking with a reporter on Vox.

His attempts to control the story could only provide more evidence to regulators as the company enters bankruptcy proceedings that began when it filed for Chapter 11 protection on Nov. 11.

Bankman-Fried despises regulators, which his critics might find ironic.

He was looking for backers, although it seems that the money that millions of thousands of customers have invested in the platform is unlikely to be returned even if the company’s assets are sold.

Bankman-Fried sent several direct messages via Twitter to Kelsey Piper, a Vox reporter who first met him on Zoom over the summer when she profiled him.

Piper reached out to him via Twitter on Nov. 13, and he responded by mocking the regulators, saying, “F— the regulators.”

He has never criticized them before, unlike his arch-rival Changpeng Zhao, the founder of Binance, who tried to save the company with a buyout but quickly shut down less than 24 hours later.

Another irony is that Bankman-Fried spent some time in Washington lobbying for more regulation of cryptocurrency, which is a digital asset that has attracted market capitalization and attention from retail investors.

Source: www.thestreet.com

The FTX Collapse: Bankman-Fried and Its Ties to the Democrats

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