Government & Politics

FTX debtors call on politicians, parties and PACs to return campaign contributions

Sam Bankman-Fried, former CEO of the now-collapsed cryptocurrency trading giant FTX. Photo by Tom Williams/CQ Roll Call via AP Images

As the now-collapsed cryptocurrency trading giant FTX navigates bankruptcy proceedings, the company and its executives — who federal prosecutors allege made tens of millions of dollars in illegal political campaign contributions — are asking their beneficiaries to return the money. 

Those beneficiaries include U.S. Rep. Becca Balint, D-Vt., U.S. Sen. Peter Welch, D-Vt., and the Vermont Democratic Party.

FTX announced the “debtors’” request to claw back their political donations in a press release Sunday and gave recipients a deadline of Feb. 28 to comply. 

It’s the latest development in the collapse and investigation of the cryptocurrency platform and its high-profile former CEO, Sam Bankman-Fried, who has been charged with conspiracy to commit money laundering, wire fraud, securities fraud and campaign finance fraud.

During a December press conference, U.S. Attorney Damian Williams of the Southern District of New York alleged that Bankman-Fried’s campaign contributions added up to “tens of millions” of dollars illicitly sent to both Democratic and Republican candidates, as well as political action committees. 

Prosecutors allege that Bankman-Fried utilized stolen customer dollars for his political pursuits, distributing the money among his associates and directing them to donate to his chosen candidates and causes in an effort to skirt campaign contribution limits. The setup is colloquially referred to as a straw donor scheme.

Balint and Welch, both of whom received donations from Bankman-Fried during their respective campaigns last year, have since announced they would donate the money to charity. Balint also received at least $26,100 in direct contributions from Bankman-Fried’s employees and allies, and one FTX executive, Nishad Singh, bankrolled a million-dollar pro-Balint advertising blitz in the leadup to the hotly contested Democratic primary election.

The Vermont Democratic Party also received $10,000 from Bankman-Fried, though the party’s executive director, Jim Dandeneau, told VTDigger on Monday that the money came to the state party through grants distributed by the Democratic National Committee. He said the state party returned it to the DNC in late January.

Now, it appears that FTX and its unnamed “affiliated debtors” want their money back. In Sunday’s press release, the company said those debtors are sending “confidential messages to political figures, political action funds, and other recipients of contributions or other payments that were made by or at the direction of the FTX Debtors, Samuel Bankman-Fried, or other officers or principals of the FTX Debtors.”

If campaigns and committees that receive the letter do not return the money voluntarily, the company said, “​​the FTX Debtors reserve the right to commence actions before the Bankruptcy Court to require the return of such payments, with interest accruing from the date any action is commenced.”

Dandeneau told VTDigger on Monday that the Vermont Democratic Party had not received such a letter from FTX, but he said he suspected it would go to the DNC anyway. If such a letter did reach the state party, Dandeneau said, the party would forward it to the DNC.

U.S. Rep. Becca Balint, D-Vermont. Photo by Glenn Russell/VTDigger

Balint’s campaign manager, Natalie Silver, told VTDigger on Monday that the campaign had not yet received a letter from FTX. If it does, she would “proceed with caution,” she said, and her “first instinct” would be to reach out to investigators and prosecutors on the case in order to seek their guidance.

“I would want to make sure that, if we were going to direct funds anywhere, that it was going to actually reach harmed parties,” Silver said. “I just would want to be really cautious about giving FTX any more money. So I think I would probably get in touch with the prosecutor's office and honestly see what their recommendation was.”

In the meantime, Silver said the donations in question have been put in a separate account as the campaign waits to find out what it should do.

“What is hard is that, I don't know how long this type of investigation, and I'm guessing subsequent litigation, will take,” Silver said. “So at the moment, I have just sequestered these funds in a separate account because I want to make sure that we're not giving them away. And then if the right party wants them, then I want to make sure we have them.”

Silver said that, as of Monday, the Balint campaign has not been contacted by any law enforcement officials investigating Bankman-Fried or FTX. If contacted, she said, the campaign would “absolutely” comply with investigators.

The summertime million-dollar pro-Balint ad buy, funded by Singh, was carried out by the LGBTQ Victory Fund, a hybrid PAC/super PAC. Such political spending on behalf of a candidate is considered legal under federal election law, so long as the candidate does not directly coordinate with the super PAC.

A spokesperson for Victory Fund did not immediately respond to VTDigger’s request for comment Monday on whether the organization had received the FTX letter.

On Monday night, Welch’s campaign said it had not received a letter.

“Going forward, we plan to follow the guidance of the Department of Justice and the U.S. Bankruptcy Court in this matter,” the campaign said.

U.S. Sen. Peter Welch, D-Vermont. Photo by Glenn Russell/VTDigger

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Sarah Mearhoff

About Sarah

Sarah Mearhoff is one of VTDigger's political reporters, covering the Vermont statehouse, executive branch and congressional delegation. Prior to joining Digger, she covered Minnesota and South Dakota state politics for Forum Communications' newspapers across the Upper Midwest for three years. She has also covered politics in Mississippi, New York, Pennsylvania and Washington, D.C. Born and raised in Pennsylvania, she is a proud alumna of the Pennsylvania State University where she studied journalism.


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