Democratic Party

FTX warns it will claw back political donations and contributions

The exchange has warned those who received payments from FTX or its former executives that it’s looking to recover funds, even if they were donated to charity.

Bankrupt cryptocurrency exchange FTX says it is considering using legal avenues to recover all payments and contributions handed out by its associated entities and former executives, which could include the millions in political donations made by its former CEO, Sam Bankman-Fried.

In a Dec. 19 press release, FTX said it had already “been approached by a number of recipients of contributions or other payments” that were made by, or at the direction of Sam Bankman-Fried or other officers, adding those entities have sought “directions for the return of such funds.”

Just last week, three prominent Democratic organizations pledged to return over $1 million of Bankman-Fried’s political donations, following his arrest and indictment.

Days earlier, on Dec. 13, a press secretary for the White House declined to answer when asked whether the Biden administration would return the $5.2 million in campaign donations previously given by Bankman-Fried.

In its recent statement, FTX invited those who received funds to “make arrangements for the return of such payments,” warning if they weren’t returned voluntarily, the exchange would commence legal action to claw back the payments with interest.

Legal experts previously warned that up to $73 million worth of FTX’s political donations could be targeted for recovery to repay the speculated 1 million creditors owe up to an estimated $10 billion to $50 billion in its bankruptcy case.

Meanwhile, some members of U.S. Congress on the receiving end of FTX’s political contributions have reportedly donated the funds to charity in a bid to distance themselves from the exchange and its founder.

Members of Congress such as Democratic House leader-elect Hakeem Jeffries and Senate Democratic whip Dick Durbin have reportedly donated money received from FTX to various charities.

Republican Senator John Hoeven similarly donated the $11,600 he received from Bankman-Fried and FTX Digital Markets co-CEO RyanSalame to the Salvation Army.

However, FTX said these charitable offloads won’t be enough to stop it from coming after the funds, stating:

“Making a payment or donation to a third party (including a charity) […] Does not prevent the FTX Debtors from seeking recovery.”

Bankman-Fried was the second-largest Democratic Party contributor in the 2022 mid-term elections, with $36.8 million wired to candidates. He also funneled $5.2 million to Joe Biden’s 2020 U.S. presidential campaign, becoming its second-largest “CEO-contributor.”

The FTX founder claimed in a Nov. 16 interview with crypto vlogger Tiffany Fong to have “donated about the same to both parties” but his donations to Republicans were “dark.”

Related: Sam Bankman-Fried agrees to US extradition ‘to put the customers right’: Report

Other FTX executives such as Salame donated around $20 million to Republican candidates, with director of engineering Nishad Singh donating at least $500,000 to the Oregon Democrats.

On Dec. 13, Bankman-Fried was charged with violations of campaign finance laws, including contribution violations, obstructing the Federal Election Commission’s functions and making contributions in the name of others.

US lawmaker blames ‘billionaire crypto bros’ for delayed legislation

The collapse of FTX has raised alarm bells across Washington, D.C.

United States congressman Brad Sherman, a known crypto skeptic, has pointed the finger at “billionaire crypto bros” for slowing down much-needed cryptocurrency regulation. 

In a Nov. 13 statement addressing the collapse of crypto exchange FTX, Sherman said the exchange’s implosion has demonstrated the need for regulators to take immediate and aggressive action:

“The sudden collapse this week of one of the largest cryptocurrency firms in the world has been a dramatic demonstration of both the inherent risks of digital assets and the critical weaknesses in the industry that has grown up around them.”

“For years I have advocated for Congress and federal regulators to take an aggressive approach in confronting the many threats to our society posed by cryptocurrencies,” he added.

Sherman announced his plans to work with his Congress colleagues to examine options for federal legislation, which he hopes can be carried out without the financial influence of members in the cryptocurrency industry:

“To date, efforts by billionaire crypto bros to deter meaningful legislation by flooding Washington with millions of dollars in campaign contributions and lobbying spending have been effective.”

“I believe it is important now more than ever that the SEC take decisive action to put an end to the regulatory gray area in which the crypto industry has operated,” the senator added.

While Sherman made a direct reference to former FTX CEO Sam Bankman-Fried and political donations to the Democratic Party, he also mentioned Ryan Salame, the co-CEO of FTX, who donated to Republicans in 2022.

Bankman-Fried was also reported to have donated $39.8 million into the recent 2022 U.S. midterm election, which he said was distributed to both the Democratic and Republican parties. The nearly $40 million figure made him the sixth largest contributor.

While Sherman has advocated for an “aggressive approach” to crypto regulation, Thomas Hook, a Professor on Cryptocurrency Regulation at Boston University School of Law recently told Cointelegraph that regulators should be looking to implement “common sense regulation:”

“[Regulators] are reacting to an industry that is evolving constantly but overregulation could stifle that innovation […] poorly thought-out regulation could create a two-fold issue: first it could limit US consumers’ ability to participate in the cryptocurrency ecosystem and it could also drive these businesses to less regulated jurisdictions.”

“This actually creates more risk for customers as it puts them in a position of dealing with less regulated institutions to participate in the ecosystem,” he added.

His comments, however, were made before the collapse of the FTX crypto exchange. Cointelegraph has reached out to Hook to understand if his position has changed in light of the new events.

Related: US senators commit to advancing crypto bill despite FTX collapse

Meanwhile, Shark Tank host and millionaire venture capitalist Kevin O’Leary stated in a Nov. 11 interview with CNBC that U.S. regulators “need to start with one thing” rather than regulating everything at once — with the investor recommending Congress start with the Stablecoin Transparency Act.

O’Leary said that given the recent events at FTX, he believes institutional investors will likely put a pause on deploying “serious capital” into new investments until a legitimate regulatory framework is set in place:

“That would signal to everybody around the world that regulators in the United States are taking crypto on, starting to put rules in place, putting the guard rails on, no one is going to play ball in this space on an institutional level with serious capital until we get it done.”

Among the most notable cryptocurrency bills to have been introduced into U.S. Congress include the Central Bank Digital Currency Study Act of 2021, the Digital Commodities Consumer Protection Act of 2022 (DCCPA), the Stablecoin Transparency Act and the Cryptocurrency Tax Clarity Act.

Future bills will center around President Joe Biden’s executive order in March 2022 — which will include bills aimed at improving consumer and investor protection, promoting financial stability, countering illicit finance and improving the United States’ standing in the global financial system, financial inclusion and responsible innovation.