Customer money bankrolled millions in political donations made by former FTX CEO Sam Bankman-Fried, a violation of campaign finance laws, federal prosecutors say.
The Justice Department unveiled a superseding indictment Thursday, as campaign records revealed Bankman-Fried and other executives at the bankrupt cryptocurrency exchange made more than $71 million in political contributions in the two years leading up to the 2022 midterm elections.
“The defendant, perpetuated his campaign finance scheme at least in part to improve his personal standing in Washington, D.C., increase FTX’s profile, and curry favor with candidates that could help pass legislation favorable to FTX or Bankman-Fried’s personal agenda,” the indictment said. “To accomplish these goals, Bankman-Fried caused substantial contributions to be made in support of candidates of both major political parties and across the political spectrum.”
More than 40 percent of the members of the 118th Congress received financial support from FTX executives and staff last election cycle through direct contributions or money spent by super PACs in favor of their campaigns, according to Federal Election Commission filings. The company, now under the leadership of CEO John J. Ray III, is trying to recover political contributions to pay off its debts.
The indictment from the U.S. attorney for the Southern District of New York accuses Bankman-Fried of stealing billions of dollars in customer money to fund operations and investments in Alameda Research and FTX, and to make speculative venture investments, charitable donations and illegal campaign contributions to both Democrats and Republicans to try to buy influence in Washington.
In addition to charges Bankman-Fried already faced, the indictment added charges of securities and commodities fraud, conspiracy to commit bank fraud and conspiracy to operate an unlicensed money transmitting business. The former CEO pleaded not guilty in January to the original eight counts of conspiracy and fraud, including conspiracy to violate campaign finance laws.
The indictment did not bring new campaign finance charges against Bankman-Fried but provided a fuller picture of his political activities leading up to midterms.
Bankman-Fried allegedly used Alameda Research, a hedge fund he founded that enjoyed privileged access to the exchange, to siphon money from FTX customers to fund a political spending spree that placed him among the top reported donors of the midterm elections. Bankman-Fried reported $39.9 million in political contributions in 2021 and 2022, according to FEC filings.
He also relied on two co-conspirators at the company, not named in the indictment, to funnel donations sourced from Alameda Research and obscure his ties to the money.
Bankman-Fried “did not want to be known as a left-leaning partisan, or to have his name publicly attached to Republican candidates,” so one co-conspirator donated to candidates on the left and the other to those on the right, the indictment said.
Together the three made “over 300 political contributions, totaling tens of millions of dollars, that were unlawful because they were made in the name of a straw donor or paid for with corporate funds,” the filing said.
Bankman-Fried also allegedly used the co-conspirators to circumvent campaign finance laws limiting the maximum amount a donor can give to a campaign by funneling additional contributions to candidates in instances where he had already maxed out his donations, prosecutors said.
While the indictment did not name the two co-conspirators, campaign finance records show Ryan Salame, co-CEO of FTX Digital Markets, spent at least $23.7 million in the two years before the midterms, with nearly all of that going to support Republican candidates. Nishad Singh, FTX head of engineering, reported $8.3 million in political donations that favored Democrats.
Together, Bankman-Fried, Salame and Singh were the top three donors affiliated with FTX and collectively spent at least $71.9 million in the midterm elections, records show.
The indictment added four charges to the eight already faced by Bankman-Fried. Those included counts of securities and commodities fraud, which are in addition to previous charges alleging conspiracy to commit commodities and securities fraud.
Prosecutors also outlined an alleged scheme Bankman-Fried undertook to secure a U.S. bank account for FTX that resulted in charges of conspiracy to commit bank fraud and conspiracy to operate an unlicensed money transmitting business.
During 2019 and 2020, Alameda Research allegedly used its bank accounts to receive and transmit FTX customer deposits and withdrawals without informing banks of the activities, prosecutors said.
During that period, FTX approached a California bank at which Alameda already held accounts and attempted to open an account on behalf of the cryptocurrency exchange. The bank rejected the request, saying FTX would need to be licensed as a money services business and any account used to handle customer funds would require enhanced due diligence.
To circumvent those requirements, Bankman-Fried allegedly directed the establishment of a new, U.S.-based entity, North Dimension, to handle FTX deposits and withdrawals. North Dimension successfully opened an account with the California bank under the guise of a trading account affiliated with Alameda, while actually handling FTX customer transactions without enhanced scrutiny, prosecutors allege.