Recipients of Bankman-Fried’s Political Donations Should Return Money, Legal Experts Say

Samuel Bankman-Fried, founder and CEO of FTX, testifies during a Senate Committee on Agriculture, Nutrition and Forestry hearing about "Examining Digital Assets: Risks, Regulation, and Innovation," on Capitol Hill in Washington, DC, on Feb. 9, 2022. SAUL LOEB/AFP via Getty Images

Former FTX CEO Sam Bankman-Fried’s significant contributions to Democratic candidates and groups have drawn scrutiny, adding to the mounting woes faced by the disgraced crypto boss.

Most of the money was sent by Bankman-Fried to political action committees (PACs), with over $38 million going to liberal groups in 2022, with another $990,000 in individual campaign donations going to candidates directly, according to campaign finance watchdog Open Secrets.

But the PAC money was also used to support individual candidates, with $24,246,001 going in direct support of Democrat candidates.

Overseas Links

At least $29 million of the $38 million in PAC money came from addresses in Nassau, the capital of The Bahamas, according to an analysis of Federal Election Committee (FEC) data by The Epoch Times, raising concerns about the source of the funds, according to legal experts.

Bankman-Fried and other executives have allegedly failed to account for a “substantial” amount in assets missing from FTX, according to accounts filed with the U.S. bankruptcy court.

The task of tracing the money is made more complicated because the Bahamas is a well-known domicile for those who wish to avoid regulatory and governmental scrutiny for taxes and asset protection.

In 2016, the International Consortium of Investigative Journalists (ICIJ) leaked a database of nearly 170,000 registered companies in the Bahamas and named well-known Western politicians, U.S. businessmen, and others who had secret ties to companies in the Bahamas, unknown to their home governments.

Jeffery Robinson, author of “The Sink: Crime, Terror, and Dirty Money in the Offshore World,” said that the Bahamas has always talked a good game about cracking down on illegal money.

“That message has always been, ‘We’re going crack down on money dirty money. And believe me, we don’t want dirty money on the island…Unless we are discreet about it, then we can work out a way that no one will ever find out,’” Robinson told The Epoch Times about why people choose the Bahamas as a banking destination.

Legally, then, the U.S. government could find it very difficult to untangle the accounting to figure out where the money Bankman-Fried donated to the politicians originally came from, said Robinson.

“That’s why the offshore world exists exactly. That’s why the offshore world has flourished,” said Robinson.

“The money that went to the crypto regulators [running for office], has a money trail. You’ve got to obliterate that money trail. Where did the money come from? That [answer] is in the Bahamas. And that’s going to be a problem to figure out,” added Robinson.

Andrew Ross Sorkin and Sam Bankman-Fried on stage at the 2022 New York Times DealBook on November 30, 2022 in New York City. Thos Robinson/Getty Images for The New York Times

Bankman-Fried recently appeared at New York Times Dealbook Summit to respond to the alleged problems at FTX, including allegations that the firm used customer funds to fund loans and cover speculative losses at Alameda Research, a crypto hedge fund established by Bankman-Fried.

Throughout the Q&A session, Bankman-Fried said that he was either unaware of improprieties or made honest mistakes

“I didn’t knowingly commingle funds,” Bankman-Fried told the audience.

In addition to the donations that came from Bahamian addresses by Bankman-Fried, 13 donations to state Democratic parties came from addresses in Hong Kong, where FTX was previously headquartered, according to FEC data analyzed by the Epoch Times.

Legal experts told The Epoch Times that at the very least, Bankman-Fried’s political donations, which many say were part of an effort to influence lawmakers, combined with the foreign address as a possible source of funds, should have raised red flags for campaign officials.

In a bankruptcy filing, John J. Ray III, a bankruptcy specialist, who was appointed CEO of FTX said, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

Ray also charged that “a substantial portion of [FTX assets] may be missing or stolen,” adding that a “comprehensive, transparent and deliberate investigation into claims against Mr. Samuel Bankman-Fried” is one of the five core objectives of the bankruptcy.

Several top Democrats have suggested that they should donate the money contributed by Bankman-Fried to their campaigns to various charities.

Beto O’Rourke, the recently lost to Republican incumbent Greg Abbott in Texas’ gubernatorial race, returned a donation of $1 million by Bankman-Fried days before election day, said O’Rourke spokesman Chris Evans.

Legal experts said that the money should either go back to the original accounts or the campaigns should consult with the bankruptcy court in New York that is assigned the FTX case as to the best place to send funds to help depositors or investors get their money back.

Impropriety

The National Legal and Policy Center (NLPC), which concentrates on ethics issues in Washington, said that they are worried that deep impropriety, if not outright illegality, in the FTX case could get buried in the political tangle, while depositors get burned.

“So far it looks like there’s a lot of irregularities, perhaps deep illegalities going on here that need to be investigated,” Paul Kamenar, NLPC’s chief legal officer, told The Epoch Times.

“And that’s why we’re asking that these PACs return the money to the bankruptcy trustee in order to make right some of the customers who were ripped off,” added Kamenar.

The attorney said the source of funds for the FTX donations was “kind of murky” because some of the money came from the Bahamas and so the bankruptcy court won’t have authority to investigate those accounts.

“We’re going to keep an eye on this case with respect to the investigation by the U.S. Attorney to encourage a criminal investigation of FTX” and the possible attempt to influence regulators and politicians, said Kamenar.

Then CEO of FTX Sam Bankman-Fried testifies during a hearing before the House Financial Services Committee on Capitol Hill, in Washington, on Dec. 8, 2021. Alex Wong/Getty Images

Campaigns Should Return Money 

Much of the case stems from whether the source of funds came from accounts personally held by Bankman-Fried or from customer funds that were co-mingled with Bankman-Fried’s accounts, he said.

Adding to the difficulty is that Bahamian authorities have claimed jurisdiction over assets in the FTX case and moved to impound FTX assets making any idea of just returning funds to the accounts where the money originated in the Bahamas a non-starter, Scott Gessler, a campaign attorney and former secretary of state for Colorado, told The Epoch Times.

“Campaigns should simply hold the money and send a letter to the bankruptcy trustee saying ‘we have this money, this is why we have it, what do you advise that we do’?” said Gessler.

Mike Davis, president of the Article III Project, a conservative judicial advocacy group, said the donations should ultimately be returned to FTX’s creditors.

“Democrat politicians who took illegal foreign contributions should not be allowed to give that money away to their favorite left-wing charities. This money needs to go back to the people who were potentially defrauded. You can’t discharge fraud in a bankruptcy,” Davis told The Epoch Times.

Gessler said that such huge sums, potentially coming from outside the United States, by someone who also lives outside the United States should have raised alarm with politicians, even if that person is a U.S. citizen, because it could have been an attempt to avoid FEB oversight.

“When you have a U.S. citizen, living in the Bahamas, spending nearly $40 million [on elections], you have to ask yourself, ‘why is he so keen to spend money on U.S. elections when he’s living outside the jurisdiction of the United States?’” added Gessler.

Robinson said the Bahamas is still a favored banking destination for those interested in hiding their assets from the U.S. government and U.S.-based creditors.

In answer to inquiries by the Epoch Times, Attorney General for The Bahamas Ryan Pinder released a statement via email that said: “We have been shocked at the ignorance of those who assert that FTX came to The Bahamas because they did not want to submit to regulatory scrutiny; in fact, the world is full of countries in which there is no legislative or regulatory authority over crypto, but The Bahamas is not one of them.”

But when pressed on whether the U.S. was making The Bahamas a scapegoat or if The Bahamas would cooperate in investigating the sources of the political donations, Pinder declined to make additional comment.

Bankman-Fried Family Has Sophisticated Tax Law Background

Last week, Reuters reported that Bankman-Fried’s parents, who are both legal scholars, purchased an expansive, $16.4 million vacation residence in the Bahamas last year.

Reuters reported that the parents said they are attempting to return the property deed to FTX.

Joseph Bankman, Bankman-Fried’s father, writes tax law texts books, according to his bio on the Stanford University website, and is highly published in the use of tax shelters. He’s a professor at the university’s Arthur and Toni Rembe Rock Center for Corporate Governance.

“The attempt by Professor Bankman and his wife, who is also a lawyer, to return the property [they purchased in the Bahamas] to FTX sounds like they knew they did something wrong,” said Davis of Article III.

“It’s just not credible that someone like Sam Bankman-Fried, who was raised by a noted tax law professor, didn’t understand what benefits he gained from being in the Bahamas,” Davis added.

The Epoch Times made several attempts to contact Joseph Bankman but could not get through.

At Wednesday’s DealBook Summit, Bankman-Fried said he did not know about how the mansion got listed under his parents’ names, saying it was meant to be the company’s property.

Investigations Needed

“Politicians need to do due diligence on their campaign contributions when there are obvious red flags like an overseas, Bahamian address,” Davis said

The absence of such due diligence leads people to think that there was wrongdoing on the face of the evidence, he added.

“There is credible evidence that Democrats took illegal foreign contributions for their campaigns and potentially benefited from the fruits of the allegedly fraudulent transactions by Bankman-Fried,” he said.

In Gessler’s view, the evidence against Bankman-Fried and the Democrats, at the very least, “smacks of manipulation” of the campaign finance system and the regulatory system.

The legal experts called for investigations into Bankman-Fried and FTX.

“There’s investigations going on .. with the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission, and the U.S. Attorney’s Office,” Kamenar said.

But Kamenar said NLPC is planning on watching those investigations closely and will consider taking further action to help spur regulators.