Sam Bankman-Fried and two of his close colleagues at the now-bankrupt FTX donated nearly $80 million to political candidates and causes, but those who received the money may have to return it as the company tries to pay back its creditors.
That’s because bankruptcy courts often let companies claw back the money that they have given to others in the two years prior to filing for bankruptcy, according to Yesha Yadav, a law professor at Vanderbilt University with expertise in financial and securities regulation. Sometimes, that period is longer than two years, she said.
Even the political candidates who received money from Sam Bankman-Fried and told USA TODAY that they have donated the money to charity or plan to donate it to charity could be forced to give it back, Yadav said. Despite the good intention behind it, “the bankruptcy estate may come calling.”
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Bankman-Fried and two of his closest colleagues – FTX’s director of engineering Nishad Singh and co-CEO of FTX Digital Markets Ryan Salame – gave $79.8 million to political campaigns and committees from September 2020 to November 2022, according to records from the Federal Election Commission.
At least some of the donations Bankman-Fried made are tainted, according to a complaint from the U.S. Securities and Exchange Commission, although it’s not clear which ones.
The complaint broadly alleges FTX would get money from customers, lend virtually unlimited amounts of that money to Alameda Research, and Alameda Research would make loans to Bankman-Fried and his inner circle to support his lavish lifestyle, including political donations.
The SEC did not specify how much of the money obtained through fraud Bankman-Fried spent on political donations, or who received the money. And those allegations are separate from the Department of Justice’s more serious allegation that Bankman-Fried used straw donors to violate campaign contribution limits.
Bankman-Fried, Singh, and Salame are key donors to track because an affidavit in bankruptcy court from John J. Ray, the insolvency expert who is now serving as the CEO of FTX, detailed how Alameda Research and its subsidiaries made $4.1 billion in loans to people with direct interest in the company.
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The majority ($2.3 billion) went to a company affiliated with FTX Trading that Bankman-Fried owns called Paper Bird Inc. Most of the rest went to Bankman-Fried personally ($1 billion), director of engineering Singh ($543 million), and co-CEO Salame ($55 million). All three were prolific donors between 2020 and 2022.
In addition to his other donations, Salame gave the maximum allowed political contributions to his girlfriend Michelle Bond’s 2022 congressional campaign. Bond is the CEO of the Association for Digital Asset Markets, a trade group advocating for “industry best practices to facilitate safe, secure, and efficient digital asset markets.”
Salame did not respond to messages seeking comment. Bond and Singh could not be reached. Bankman-Fried’s spokesman, Mark Botnick, declined to comment for the story.
Several recipients told USA TODAY they are donating the same amount of money that they received from Bankman-Fried to charities, often in their home states, representatives said.
Sen. Lisa Murkowski, R-Alaska, gave the money to Storyknife Writers Retreat in Alaska. Sens. Susan Collins, R-Maine, and Debbie Stabenow, D-Mich., are giving the money to charity.
Sen. John Thune, R-S.D., is giving $5,800 to Feeding South Dakota, and Sen. John Hoeven, R-N.D., donated the $5,800 his campaign received from Bankman-Fried to the Salvation Army in North Dakota. Rep. Hakeem Jeffries, D-N.Y., donated the sum of money to the American Diabetes Association.
Rep. Jake Auchincloss, D-Mass., told a public radio station the morning after Bankman-Fried’s arrest: “I’m not gonna send money to a guy sitting in a Bahamian jail – that’s for sure. That money is already out the door helping elect Democrats.”
Sen. Mitt Romney, R-Utah, is giving the money to the U.S. Treasury. The FEC says on its website that campaigns should return money within 30 days if they discover the contributions were prohibited, but they can give the proceeds instead to the Treasury.
“The Senator condemns Sam Bankman-Fried’s reprehensible behavior and believes he must be held accountable for his actions – which have caused harm to many,” Romney spokesperson Arielle Mueller said in a statement provided to USA TODAY.
Yadav said there are two legal avenues the bankruptcy estate is likely to use to get this money back: a provision that allows the estate to take back everything distributed in the 90-day window prior to filing bankruptcy, and the more complex process to claw back money distributed in the two years or more preceding the filing.
She said Ray, the current CEO of FTX who ran Enron during its bankruptcy proceeding, is skilled at getting money back for creditors, and is likely to file lawsuits against parties that received tainted FTX money – which could include political campaigns – so customers can be made as whole as possible.
“That’s exactly what he did at Enron,” Yadav said of Ray. “The way he was able to get 50 cents on the dollar for creditors for Enron was by suing the big banks for their involvement. … It’s my feeling that he’s going to be using lawsuits very frequently in this case, and this is a potential route for that.”
Yadav said bankruptcy recoveries tend to be in the ballpark of a few cents on the dollar.
Yadav said there are defenses that recipients of the tainted money can put up, but, “If you get sued, you get sued. It doesn’t imply necessarily that you are a bad person, but it just means that you need to fight if you want to keep the money if you don’t have the money to give.”
The biggest PACs that received donations from Bankman-Fried, Singh, and Salame did not respond to requests for comment.
White House Press Secretary Karine Jean-Pierre referred questions about contributions to Biden and his affiliated committees to the Democratic National Committee, noting that federal law prohibits her from talking about campaign money.
“Given the allegations around potential campaign finance violations by Bankman-Fried, we are setting aside funds in order to return the $815,000 in contributions since 2020,” Daniel Wessel of the DNC said in a statement. “We will return (them) as soon as we receive proper direction in the legal proceedings.”
Chris Taylor, a spokesperson for the Democratic Congressional Campaign Committee – the fundraising arm for the party’s House candidates – said the DCCC is setting aside $250,000 in response to Bankman-Fried’s alleged campaign finance violations.
An aide for the Democratic Senatorial Campaign Committee — the similar arm for the party’s Senate candidates — said it has set aside $103,000 in donations associated with Bankman-Fried and “will return it as soon as we receive proper direction in the legal proceedings.”
“We are waiting for further guidance from the government on what to do with the money based on their legal proceedings,” Taylor said in a statement.
Jean-Pierre said the administration has called for stricter oversight of crypto.
“This administration has consistently urged Congress to take action to address regulatory gaps posed by digital assets and support legislative efforts to enact crypto legislation to better protect American consumers,” she said.
“Again, we have urged – this is something for Congress to do. We have urged Congress to take action, and we’ll continue to do that.”