Sam Bankman-Fried’s relationship with George Santos is just the beginning

George Santos, a funny and inventive congressman from Long Island, was charged and arrested this week. Santos is linked to another apparent liar: Sam Bankman-Fried, founder and former CEO of the collapsed crypto exchange FTX. Bankman-Fried’s connection to Santos was just one caveat in Bankman-Fried’s extensive political influence campaign, financed largely by stolen client funds.

The goal of this campaign, however clumsy, may be to pass cryptocurrency legislation, the Digital Consumer Protection Act, or DCCPA. Many have argued that the DCCPA will benefit FTX at the expense of the broader crypto ecosystem and perhaps even allow Bankman-Fried to continue his massive embezzlement scheme.

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To hold the candidate

George Santos apparently told a number of lies about his biography and resume, including being Jewish, a former Broadway producer, and the son of an assassination attempt survivor and 9/11 survivor. As fascinating as lying is infuriating, it represents strategic deception rather than a form of mental illness.

But the charges against Santos this week are serious and a little sad: He faces 13 charges, including money laundering and wire fraud. This included embezzling $50,000 in campaign funds to buy himself fancy clothes.

According to public records released in December 2022, Santos’ donors included three prominent figures from within FTX. The Santos campaign received the maximum individual donations possible from FTX senior management Claire Watanabe, Chief Product Officer Ramnik Arora, and Ryan Salame, CEO of FTX Digital Markets’ Bahamian subsidiary, who gave more than $24 million to midterm Republican candidates and committees.

The information was confusing when it first surfaced—Santos had no real connection to FTX and had no interest in crypto or any of the other issues that Bankman-Fried seemed to be concerned about. According to Puck News, the explanation for the Santos connection is relatively simple. Salameh’s girlfriend, Michelle Bond, the former CEO of FTX-backed crypto trading group, is running for Congress as a Republican MAGA in 2022 in a district near Santos.

Donations from FTX executives were sent to Santos as part of a deal with Bond to “swap” donors who had reached their personal donation threshold to a partner candidate. In other words, FTX executives gave Santos the money as part of their support for Bond, not because he supported him. Park describes these exchanges as very common in political campaigns. But Salame was deeply involved in other aspects of the FTX rush. Although she has not yet been charged with any crime, the $4 million home she shared with Bond was raided by the FBI in late April.

Effective selfishness

While this may not seem like a crime in itself, the mysterious connection between FTX and George Santos highlights the far-reaching nature of Sam Bankman-Fried’s biggest political influence campaign in 2021 and 2022. In the months since the collapse of FTX and Bankman-Fried’s arrest, it has become clear that these political activities are as corrupt as every other aspect of his affairs.

Criminal charges against Bankman-Fried include violating campaign finance laws by diverting (stolen) corporate funds through so-called “straw donors,” including Salam and FTX founder Nishad Singh, to circumvent the law. The shadow donor program appears to be designed primarily to disguise the fact that Bankman-Fried has actually donated to both Republicans and Democrats while posing as the next Democratic mega-donor.

See also: Sam Bankman-Fried was indicted on additional charges of bank fraud

But this is only the beginning of an ever-widening and frankly very strange relationship between a large group of political oppressors.

As an example, one source said Park received a donation from Nishad Singh, but they had a relationship with Mind the Gap, a pre-FTX fundraiser run by Sam Bankman’s mother. – Fried, Barbara Fried. This means Mind the Gap may have helped identify participants who received stolen FTX client funds.

Another key link in the FTX influence effort was Democratic strategist and fundraiser Sean McElwee, who allegedly helped fund Bankman-Fried. McElwee was recently found to be betting on political races, including on candidates he worked for. Although McElwee faced no legal fallout, the two strikes led to his ouster in December 2022 as head of Data for Progress, a left-leaning think tank and poll he founded in 2018.

Long game

These are actually just a few highlights of Operation Byzantium. But what did Sam Bankman-Fried stand to gain by distributing so much money in such a fraudulent way?

In public, Bankman-Fried used her political gifts to bolster her carefully crafted (and false) image as a concerned philanthropist. For example, another apparent intermediary for FTX funds was Sam’s younger brother, Gabe Bankman-Fried, who was in charge of a political non-advocacy organization called Action Against the Pandemic (GAP). The main source of funding for the organization was FTX.

Many in the industry opposed the DCCPA legislation that Bankman-Fried helped craft.

GAP’s political efforts seem to have been completely clumsy and ineffective. Pandemic defense spent unprecedented amounts in an Oregon House race, but its candidate lost. GAP also intervened in Colorado’s ballot initiative, succeeding in alienating nominally cooperative parties. And Michelle Bond scored 20 points and lost the main house. The combination of demonstrated incompetence and corruption parallels Alameda Research’s ability to lose large sums despite having a cheat code on FTX.

But even if you’re incompetent, throwing away tens of millions counts for a lot in Washington, D.C. Bankman-Fried’s donations have helped him win meetings with the likes of Securities and Exchange Chairman Gary Gensler. Subpoenas to testify on cryptocurrency before the United States Commission (SEC) and Congress. Gensler and others seemed eager to welcome Bankman-Fried as the “adult in the room” on crypto regulation.

See also: FTX is asking politicians who received donations from Sam Bankman-Fried to return the funds

But many in the industry opposed the DCCPA legislation that Bankman-Fried helped craft, which would impose burdensome and even absurd requirements on decentralized finance (DeFi) platforms and services. Many argued that these regulations would mean a ban on DeFi in the US and send more crypto to centralized structures, including FTX. This could save FTX from bankruptcy and help keep many of Bankman-Fried’s alleged crimes secret.

As Bankman-Friedke approaches his scheduled October criminal trial, the theft of client funds will be a major concern for many crypto industry watchers. But this is only part of a much darker charge: Bankman-Fried, with the help of many allies, used the stolen funds to subvert the United States legislative process for her own selfish purposes. .

The views and opinions expressed herein are those of the author and reflect those of Nasdaq, Inc.