You’ve probably seen the name Sam Bankman-Fried in headlines this week. While the scandal involving his crypto company FTX is convoluted, here are the basics you should know about the mega Democrat donor and his multibillion-dollar scam operation.
Bankman-Fried was the CEO of FTX, a cryptocurrency exchange based out of the Bahamas. On Nov. 8, Bankman-Fried announced on Twitter that the FTX exchange had run out of money to process the uptick in customer withdrawal requests. FTX immediately halted customer withdrawals and the result was a $10 billion hole as millions of cryptocurrency investors were left with frozen trading accounts and little hope of recovering funds. Within hours of FTX freezing customer assets, Bankman-Fried’s net worth plummeted in the biggest single-day loss of net worth by a billionaire on record, dropping from over $15 billion to nothing in a matter of days.
Why Did FTX Unravel?
On Nov. 6, it became known to the public that FTX had several large financial positions that were in danger. This news created an uptick in customer withdrawal requests from the FTX exchange as some customers became worried that FTX could run out of funds if their positions failed.
The FTX exchange also had its own cryptocurrency (FTT) which had a valuation of several billion dollars and was used primarily as a way to invest in FTX, and gain benefits such as lower fees on the FTX trading platform. Following the news that FTX positions were in danger, the price of FTT began to plummet as investors sold.
One of the largest holders of FTT was another large cryptocurrency exchange called Binance. Binance started selling its large FTT holdings on the open market until the entire FTX operation unraveled. FTX was unable to sustain the pressure and went bankrupt with $10 billion in liability.
In the days following the collapse of FTX, more details have come to light about how Bankman-Fried defrauded investors. Customers who deposited funds to trade on the FTX exchange had their funds stolen by Bankman-Fried, which he then reportedly gambled on risky bets, exuberant living, and political donations.
Bankman-Fried Was a Huge Democrat Donor
The disgraced FTX CEO was active in American politics and was a vocal supporter of many Democrats including President Joe Biden. Bankman-Fried met with major Democrats and regulators on several occasions in an attempt to influence regulation of the cryptocurrency market. He was also seen speaking at several conferences with big-name Democrats including former President Bill Clinton. Sam Bankman-Fried’s father has also been active in American politics, writing legislation for Elizabeth Warren and donating heavily to Democrat candidates.
Bankman-Fried was the second-largest individual contributor to Democrats in the 2022 midterm election, giving more than $36 million to Democrat candidates and only $235,200 to Republicans. He donated to a handful of candidates in the Democratic Party through a PAC called Protect Our Future. Protect Our Future’s stated mission is to support candidates who will be “champions for pandemic prevention.” The PAC gave significant sums of money to Democrat candidates Lucy McBath and Carrick Flynn, and several others.
Other notable donations from Bankman-Fried include hundreds of thousands of dollars to the Democratic National Committee as well as a couple of maximum individual contributions to Republicans John Boozman (R-Ark.) and John Hoeven (R-N.D.). His largest contribution, totaling over $10 million and made via Protect Our Future, went to Democrat congressional candidate Carrick Flynn, who lost his primary bid for election by significant margins.
Furthermore, in the previous presidential election cycle, Bankman-Fried gave millions of dollars to support Joe Biden’s presidential campaign, in addition to several other Democrats. He was also vocal about his intentions to give between $100 million and $1 billion in the 2024 election.
These major donations to Democrats appear to have come at the expense of the investors from whom Bankman-Fried stole. Details revealed about the inner workings of FTX indicate that Bankman-Fried abused customer assets to take out large loans and engage in poor trading practices.
To make matters worse, Bankman-Fried had no apparent intention of stopping his fraudulent practices. In a podcast, he declared that he would donate up to a billion dollars in the 2024 presidential campaign. If FTX had not collapsed, Bankman-Fried would presumably have used his fraudulent practice to supply hundreds of millions of dollars more to the Democratic Party in the upcoming presidential election. For now, there are many Democrats with close monetary ties to the disgraced FTX head, and it is still unclear how the situation will continue to unravel.