The FTX collapse and Bankman-Fried arrest has tentacles that reach beyond corporate and individual investors’ shocking torrential economic losses. Before Bankman-Fried’s fall from grace, Congress invited him to speak at the House Financial Services Committee to testify and answer questions about FTX, the cryptocurrency sector, and a proposed cryptocurrency bill that Bankman-Fried supported. It turns out that FTX supported the bill in lobbying efforts as well as Congressional testimony.
In 2021, FTX had an arguably modest position in lobbying — $50,000. But in 2022, FTX spent $640,000 in federal lobbying expenses/efforts.[1] More than that, in 2022, FTX ranked nine in top individual federal campaign contributions – nine out of 25,419[2], and just a few slots above George Soros. In 2022, FTX contributed $21.8 million to political campaigns. This from a man now accused by three federal agencies of violating federal fraud statutes. Bankman-Fried testified in Congress in 2021.[3]
In his testimony, Bankman-Fried touted his disruptive do-gooder corporate culture, ready to undo the overly rigid corporate structures in the U.S. He said, “My goal has been to find ways to have a positive impact on the world and to maximize that. And to do so by supporting some really fantastic organizations.” Bankman-Fried spoke about his company and how it superseded others. He stated, “We are the second or third largest exchange globally depending on what metrics you use, processing about $15 Billion per day of trading volume on the platform.” Criticizing current financial ecosystems, Bankman-Fried said, “We have also put a lot of work into the risk controls in our platform. We monitor via multiple solutions all blockchain transfers into and out of our exchange. It’s true of our risk engine, which is a 24/7 risk engine. That is unlike the traditional financial ecosystem.” And then Bankman-Fried boasted about how he seeks to assist law enforcement. He stated, “We would love to have standardized open lines with law enforcement where they know exactly how to reach out to us. We can have phone numbers available.”
Bankman-Fried’s bluster and branding created a crash and burn platform. The emperor with no clothes now sits in his parents’ home. And for sure, the feds have his number.
For questions related to white collar criminal defense matters, please contact Laurel F. Grass at lgrass@leechtishman.com or 212.603.6300. Laurel is Counsel with Leech Tishman and a member of the Litigation & Alternative Dispute Resolution, White Collar & Government Investigations, Corporate, and Data Privacy & Cybersecurity Groups.
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[1] https://www.opensecrets.org/news/2022/12/former-ftx-ceo-sam-bankman-fried-indicted-on-campaign-finance-violations-as-house-financial-services-committee-probes-new-ceo/ (Last accessed January 1, 2023.)
[2] https://www.opensecrets.org/orgs/ftx-us/summary?toprecipcycle=2022&contribcycle=2022&lobcycle=2022&outspendcycle=2022&id=D000073694&topnumcycle=2022. (Last accessed January 3, 2023.)
[3] Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States. December 8, 2021.