'It was all done with stolen money': Crypto magnate's fall causing headaches for the candidates he backed

In the tech world, billionaire Sam Bankman-Fried is best known for heading the ill-fated cryptocurrency exchange FTX. But he is also a major donor to Democratic politicians. And Bankman-Fried’s legal problems, according to Politico’s Sam Brodey, have become a worry for Democrats — including Rep. Lucy McBath of Georgia, who is set to begin a third term in the U.S. House of Representatives this Tuesday, January 3.

“When Rep. Carolyn Bourdeaux was gearing up last spring for a primary battle against Georgia Democratic incumbent Rep. Lucy McBath,” Brodey reports in an article published on January 2, “Bourdeaux’s campaign team flagged an alarming article in Politico for her to read. It reported that Sam Bankman-Fried, a twentysomething cryptocurrency billionaire, was making his foray into politics as a Democratic big-money player — and he was starting with a seven-figure campaign to reelect McBath and defeat Bourdeaux…. Soon after, nearly $2 million worth of TV ads from Protect Our Future PAC — which touted McBath’s inspirational personal story and positions on health care and Social Security — began blanketing the airwaves in suburban Atlanta.”

Brodey continues, “The ads, among the first of the race, helped introduce McBath to a newly drawn district that was home to few of her prior constituents. Bourdeaux, already considered an underdog in the race, struggled to pick up traction. She lost in a landslide. Six months later, McBath is preparing for a third term, Bourdeaux is leaving Congress, and Bankman-Fried is in federal custody, likely facing a number of criminal charges.”

READ MORE:FTX founder Sam Bankman-Fried arrested and indicted for 'massive, years-long fraud'

According to Brodey, FTX’s collapse “has revealed that his deluge of campaign cash wasn’t just shady — it may have been stolen.”

“Federal prosecutors for the Southern District of New York allege that Bankman-Fried directed ‘tens of millions’ in illegal campaign contributions using the money customers had deposited in FTX’s platforms to grow their savings, not fund political campaigns,” Brodey reports. “Among the charges federal prosecutors are pursuing against Bankman-Fried are campaign finance violations. Court filings have suggested evidence that he spearheaded an illegal ‘straw donor’ scheme where other individuals contributed his money in their names.”

Brodey adds, “In response to the news, many entities that received checks from FTX have either donated those funds to charity or set them aside in the event they are reclaimed in some kind of legal proceeding. FTX executives gave tens of millions of dollars directly both to Democratic and Republican candidates and organizations, with Bankman-Fried himself claiming that he obscured his contributions to the GOP in order to evade scrutiny. But when it comes to Protect Our Future PAC, that money is long gone.”

Protect Our Future PAC, according to Brodey, “spent over $24 million in 18 House Democratic primaries around the country” in 2022. And 14 of the candidates it backed “will be serving in the House” beginning January 3.

READ MORE: 'Headed for oblivion': Economist Paul Krugman warns of 'collapse of crypto institutions' after FTX debacle

“Come January,” Brodey observes, “there will be a caucus of lawmakers on Capitol Hill who — if they don’t owe their seats entirely to Bankman-Fried — at least saw their paths to power paved with stolen, illegal campaign contributions.”

Adav Noti, senior vice president of the nonprofit Campaign Legal Center, told the Daily Beast, “It’s hard to think of a historical parallel where there was not only massive amounts of political spending, but some or all of that spending was illegal under campaign finance law and it was all done with stolen money.”

The Beast also interviewed Jordan Libowitz, communications director for the watchdog group Citizens For Responsibility and Ethics in Washington (CREW).

Libowitz told the Beast, “We don’t have a lot of precedent for people trying to disavow spending outside of their own campaign that’s helped by someone who’s now controversial. As for grappling around it, that requires a certain amount of shame, which is in short supply with members of Congress.”

READ MORE: Here's a quick explainer of what happened with crypto giant FTX — and how the GOP is lying about it