- The campaign finance violations detailed in a 14-page indictment against one-time crypto billionaire Sam Bankman-Fried are numerous and varied.
- Prosecutors accuse the FTX founder of conspiring with others to make and receive illegal campaign donations, hide them, misuse corporate contributions and of improperly using a conduits to hide who was giving the money.
- Campaign finance records show that his hedge fund, Alameda Research, donated $5 million in 2020 to the pro-Biden Future Forward USA.
Before FTX founder Sam Bankman-Fried was arrested in the Bahamas on multiple criminal securities fraud violations Dec. 12, he was considered the crypto "darling" of Washington, helpfully testifying before Congress, meeting with regulators and lavishly spending tens of millions on political campaigns.
U.S. prosecutors say at least some of that money came from Alameda Research, a hedge fund he founded. He and his co-conspirators allegedly diverted billions of dollars in customer funds from FTX to Alameda that were then misused in a variety of ways, including to donate to political candidates and campaigns, federal prosecutors said.
The campaign finance violations detailed in a 14-page indictment are numerous and varied. Prosecutors from the Southern District of New York accuse Bankman-Fried of conspiring with others to make and receive illegal campaign donations, hide those donations, misuse corporate donations and of improperly using a conduit to hide the donations. Bankman-Fried "and others known and unknown" also allegedly gave money under other people's names and exceeded limits on political contributions, according to the indictment.
While prosecutors don't name Bankman-Fried's co-conspirators, they said he worked with "others, known and unknown, (who) knowingly did combine, conspire, confederate, and agree together and with each other to defraud the United States" to intentionally skirt campaign finance laws, according to the indictment. Prosecutors are reportedly looking at former FTX director of engineering Nishad Singh, the co-CEO of FTX digital markets Ryan Salame, as well as contributions by Alameda Research and FTX, The New York Times reported. Bankman-Fried, Singh and Salame, combined, contributed at least $70 million toward the 2022 midterms, according to data from nonpartisan campaign finance watchdog OpenSecrets.
Singh and Salame did not respond to requests for comment. A spokesman for Bankman-Fried declined to comment.
Bankman-Fried became a prolific political donor in recent years, giving almost $40 million in publicly disclosed contributions mostly to Democrats in the 2022 midterm races. State and federal campaign finance data and nonprofit records show a number of questionable donations now under increased scrutiny that indicate Bankman-Fried could have spent millions more than previously disclosed currying favor with Washington lawmakers.
He's publicly admitted that he also gave roughly $40 million to Republicans during the campaign cycle, although those payments weren't publicly disclosed and aren't counted toward his total donations.
None of the groups, candidates or nonprofits that received donations from Bankman-Fried or his executives have been charged with any crimes, and the indictment notes that just because a group receives a donation later deemed illegal does not mean they had any knowledge it was. The New York Times reported that prosecutors have sent emails seeking more information from Democrats and Republicans on some of the donations.
Bankman-Fried and his colleagues were also generous donors to charities and political causes championed by his family. The disgraced CEO donated to his brother Gabe Bankman-Fried's nonprofit organization, Guarding Against Pandemics. Bankman-Fried's mother, Barbara Fried, ran Mind the Gap, a super PAC that backed mostly Democratic issues. Singh personally donated $1 million to the group.
Mind the Gap reportedly worked as a donor advisory group that helps Democrats raise campaign cash, but it made zero publicly disclosed donations to candidates, parties or other political action committees, according to OpenSecrets.
Alameda Research donated more than $12 million to Gabe Bankman-Fried's nonprofit since late last year, according to California state campaign finance records. Guarding Against Pandemics used the funds to help finance a campaign to support a California ballot initiative that would levy a special tax against people making more than $5 million a year to fight future pandemics, according to state records. The ballot measure will be voted on in the 2024 election.
The nonprofit wiped all traces of the Bankman-Fried brothers off its website after FTX filed for bankruptcy in November, including a mention of Sam Bankman-Fried as one of its donors. The website doesn't mention Alameda as a sponsor, even though almost one-fourth of its total donations last year came from the hedge fund, records show. The nonprofit spent over $1 million since last year lobbying the federal government on pandemic-related matters, including engaging with White House officials, according to disclosure reports.
The group's 2021 tax record, which was obtained by CNBC, shows the organization raised $22 million last year. The organization does not publicly disclose its donors on that form. California state campaign finance records show Alameda donated $5 million to Guarding Against Pandemics last year and $7.1 million this year.
A representative for Guarding Against Pandemics didn't respond to a request for comment.
"This appears to be yet another example of diversion of FTX customer funds without the knowledge or consent of FTX customers," Richard Painter, the former chief ethics lawyer in George W. Bush's White House, told CNBC after reviewing the donations. "An open question is how much the recipient of these funds — whether political candidates or Gabe's nonprofit — knew about the true source of the funds they had received — i.e. that they had FTX customer money."
While Guarding Against Pandemics boasts on its tax filing that the group "advocates for public investments to prevent the next pandemic," its 2021 records show it donated to at least two groups aligned with the Democratic Party.
The charity donated $100,000 to the House Majority Forward, a 501(c)(4) nonprofit affiliated with House Majority PAC, according to the tax form. Both groups work to help Democrats get elected to the House of Representatives. The House Majority PAC received a $6 million donation from Sam Bankman-Fried during the 2022 election.
Guarding Against Pandemics also gave $1 million to Voto Latino Action Fund, a nonprofit voter registration group. A spokesman for Voto Latino said an email that "Guarding Against Pandemics gave us funding to oppose [Democratic] Governor Newsom's recall; the funds were received and spent in connection with that effort last year. There are no funds remaining from this organization."
Guarding Against Pandemics also paid political communications and media company GMMB just over $690,000 last year for advertising and production, its tax form says. That firm received $24 million from various Democratic campaigns during the 2022 elections, according to OpenSecrets. Jim Margolis, a founding partner of GMMB, served as a senior advisor to former President Barack Obama's 2008 and 2012 runs for the White House.
A spokesman for GMMB told CNBC that the payment from Guarding Against Pandemics to the firm was for a "media buy."
"This was a media buy placed for Guarding Against Pandemics. GMMB was not involved in developing the strategy, creative or production of the advertising and simply placed the media buy with stations like NBC Universal who were the beneficiaries of the ad spending. It was not a fee for GMMB," the spokesman said.
Alameda Research also delved into politics, donating $5.24 million in 2020 to Future Forward USA, a super PAC that backed President Joe Biden's White House win, according to Federal Election Commission records. Bankman-Fried separately donated $5 million to the super PAC that cycle. A representative for the PAC did not respond to a request for comment.
While U.S. prosecutors didn't release details of specific donations, they said Bankman-Fried "and his co-conspirators made millions of dollars in political contributions funded by Alameda Research to federal political candidates and committees in advance of the 2022 election."
"To conceal the fact that those contributions were paid for using funds from a corporation and to evade contribution limits and reporting requirements, Bankman-Fried caused contributions to be reported in the names of co-conspirators rather than in the name of the true source of the funds," they said in a press release announcing the indictment.
Stuart McPhail, an attorney from Citizens for Responsibility and Ethics in Washington, said the Future Forward donation could have violated campaign finance laws if Alameda was posing as a front for someone else.
"It would be illegal, however, if Alameda was not the true source of the funds, but was merely a conduit for someone else's money," McPhail said in an email to CNBC. "Of course, it would also break other laws, outside of campaign finance, if Alameda was stealing money to make those contributions. Given the DOJ's, the SEC's, and the CFTC's allegations, it is quite possible that is what happened."
The ethics group filed a complaint to the FEC before Bankman-Fried's arrest, asking them to investigate the former FTX CEO for alleged "serious violations" of election law. They cited Bankman-Fried's admitted contributions of "dark" money to Republican election efforts during the 2022 primary season.
A Las Vegas-based fintech company called Prime Trust was listed as donating $14 million in February and March to Protect Our Future, a super PAC that backed Democrats during the 2022 primary season, FEC filings show. That money, however, reportedly came from Sam Bankman-Fried and Singh, according to Politico.
Erin Holloway, the president of global marketing for Prime Trust, told the outlet at the time that the company was "identified in the PAC filing solely because the transferred funds were held in an account under Prime Trust's name for the benefit of a specific customer, and Prime Trust originated the wire transfer at the direction of that customer."
Though Prime Trust didn't say at the time who the client was, Scott Purcell, the company's founder, told CNBC, "I know that FTX was a customer of Prime Trust." FTX, at the time, told Politico that the customer Prime Trust referred to in its explanation of the donation was Bankman-Fried.
The Oregon State Democratic Party reported a $500,000 donation labeled as being from Prime Trust, which turned out to be from Singh, according to The Oregonian/Oregon Live. CNBC discovered other October filings that say they originated from Prime Trust, including contributions to the campaign of Sen. Raphael Warnock, D-Ga., as well as the successful Democratic gubernatorial campaigns of Michelle Lujan Grisham of New Mexico and Laura Kelly of Kansas. The campaign of Rep. Lou Correa, D-Calif., also picked up a donation from Prime Trust in October.
The company confirmed in an email that FTX.US was a Prime Trust customer.
"When a customer makes a payment through Prime Trust ... the bank processing the payment includes Prime Trust's name in payment instructions because the payment is from an account in our name," Matt Parrella, Prime Trust's general counsel, told CNBC in a statement. "The recipient (i.e., PAC) will have to look beyond account name to determine the donor."
Representatives for Warnock, Lujan Grisham, Correa and Kelly did not respond to requests for comment.
Brendan Fischer, the deputy executive director at the watchdog group Documented, told CNBC in an email that the October contributions were "surprising" and the FEC would likely ask the campaigns to refund those donations or attribute them to an individual.
"Campaign committees cannot accept corporate contributions, and can only accept contributions from LLCs taxed as partnerships and where the contribution is attributed to the partners," Fischer said. "The FEC is going to follow up with Warnock and Correa and ask that the Prime Trust contributions be refunded or attributed to an individual."