'Dazzled by the money': Democratic ties to Sam Bankman-Fried under scrutiny after FTX collapse

‘Dazzled by the money’: Democratic ties to Sam Bankman-Fried under scrutiny after FTX collapse

The fall of Sam Bankman-Fried dealt an unprecedented blow to the reputation of the crypto industry – and some of that infamy may rub off on the politicians who took his money, as well as former regulators and employees. of Capitol Hill who took high-paying jobs representing digital asset companies before Congress.

Bankman-Fried, founder and CEO of ruined cryptocurrency exchange FTX, was one of the most generous donors to political causes in the 2022 election cycle, doling out $40 million, mostly to Democrats, with a particular focus on supporting crypto-friendly politicians in the Democratic primaries.

FTX, like many other crypto firms, has also aggressively recruited former federal regulators and Capitol Hill staffers, an oft-criticized but common practice in the financial services industry for decades.

Jeff Hauser, director of the left-leaning Revolving Door Project, said Democratic politicians who worked closely with Bankman-Fried will have a lot to explain to the party’s progressive wing.

“A lot of people in the Democratic Party have really come close to Sam Bankman-Fried, and that’s a very poor reflection of people who took this guy seriously,” he said. “People who in their past lives have taken corporate power have been dazzled by the money seemingly thrown their way.”

Bankman-Fried was the main funder of the Protect Our Future PAC, which has spent tens of millions of dollars on the Democratic primaries this year. He also floated the idea of ​​spending over $1 billion in the 2024 presidential election to beat Donald Trump if he was the Republican nominee.

Pledges of money on this scale likely appealed to many Democratic politicians, Hauser said, whether or not Bankman-Fried ever planned to follow through on those contributions.

The crypto industry has also been influential by hiring former Capitol Hill employees and federal financial regulators to lobby and advise them on regulatory issues. The Campaign for Accountability, a nonpartisan anti-corruption watchdog, released a report in February that found 240 examples of officials in key positions in the White House, Congress, federal regulatory agencies and national political campaigns. entering and exiting the industry.

“The crypto industry is following the standard playbook for advancing vested interests in Washington, including using all industry levers of influence,” said Dennis Kelleher, president and CEO of the nonpartisan financial reform organization Better Markets, at MarketWatch. “One of the most pernicious aspects of this is the revolving door, where ex-civil servants essentially sell their public service by using their access and influence on behalf of their private clients.”

Kelleher praised the performance of federal banking and securities regulators who have managed to keep the carnage in the crypto markets separate from the traditional financial system as popular tokens like bitcoin BTCUSD,
and ether ETHUSD,
lost more than 70% of their value in the past year.

Still, he thinks the crypto influencer campaign has convinced lawmakers that what is needed is legislation that would adapt the financial regulatory apparatus to be friendlier to the business models of the companies. digital asset companies, rather than increasing funding for market regulators to enforce regulations. already in the books.

A bill introduced in June by Republican Senator Cynthia Lummis of Wyoming and Democratic Senator Kirsten Gillibrand of New York would do just that, granting regulatory authority for the most popular cryptocurrencies to the Commodity Futures Trading Commission, which, according to critics of the bill, is more compatible with cryptocurrencies than the Securities and Exchange Commission.

Another bipartisan bill from Senate Agriculture Committee Chair Debbie Stabenow of Michigan, a Democrat, and Senator John Bozeman of Arkansas, the committee’s ranking Republican, envisions a similar setup.

Kelleher said these bills are the product of intense lobbying efforts by the crypto industry, and without that push, lawmakers might see that what is needed is more funding to enforce the laws. on securities that already exist.

“People need to realize that the crypto industry is fundamentally anarchic,” Kelleher said, adding that exchanges like FTX could have made the decision to register as a stock exchange with the SEC, whose oversight would have ensured that the company could not engage in the type of activities that led to its downfall.

“Industry made a conscious decision not to comply with the law, to spend hundreds of millions of dollars on public officials to pass special legislation so they would get special treatment,” he said. -he declares.

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