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Could it get any worse? Authorities arrested FTX founder and CEO Sam Bankman-Fried last December, shortly after his crypto exchange imploded, taking all its investors to the proverbial bank. Prosecutors charged him with multiple counts of various felonies, including wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering, landing him in serious hot water.
Even after he was in custody, investigators continued to look into other areas of Sam Bankman-Fried's business dealings. Those probes led to at least 12 additional charges against the cryptopreneur for wire, bank, and commodity fraud, additional money laundering charges, illegal political contributions, and "operating an unlicensed money transmitting business." According to CNBC, the additional charges alone could tack on decades of prison time if convicted.
Federal prosecutors unsealed the "superseding indictment" on Thursday, revealing even more mishandling and shady dealings involving SBF's management of FTX and his hedge fund Alameda Research. The document notes that he used funds from both entities "to fund speculative investments, to make charitable contributions, and to enrich himself."
While Bankman-Fried has always been publically open about his political contributions, a dark underbelly to his activity went unnoticed. Investigators claim that SBF made more than 300 illegal political donations reaching into the tens of millions of dollars.
While most of his public donations went to Democrats, prosecutors claim that behind the scenes, SBF was operating a "straw donor" scam to plant seeds of influence with both Democrats and Republicans, who would ultimately be the regulators of the crypto industry. Bankman-Fried allegedly carried out his straw donor scheme by "coercing" two unnamed FTX executives to make donations to particular political officials using money from FTX and Alameda and at SBF's discretion.
"In total, the defendant and his co-conspirators 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. In dozens of instances, BANKMAN-FRIED's use of straw donors allowed him to evade contribution limits on individual donations to candidates to whom he had already donated. To avoid certain contributions being publicly reported in his name, Bankman-Fried conspired to and did have certain political contributions made in the names of two other FTX executives."
Investigators claim that SBF tried to keep his Republican contributions "dark" and that he used the chat app Signal's "Donation Processing" feature, which autodeletes logs of transactions after use. Bankman-Fried and his co-conspirators additionally attempted to hide their donations by logging "the outgoing wire transfers from Alameda to individuals' bank accounts for purposes of making contributions as Alameda 'loans' or 'expenses.'"
Perhaps the most glaring red flag to his political shenanigans was Alemeda's bookkeeping. The hedge fund recorded over $100 million in political contributions in its ledgers for the 2022 midterms. However, Federal Election Commission records show no donations from Alameda to candidates or political action committees in 2022.
While nobody mentions names, a group representing investors conned by SBF has reportedly sent "confidential messages" to candidates, PACs, and others who received the illegal funds, asking them to return the money to investors. It is unclear if these attempts to collect some of the wasted money are proving successful.
Image credit: Bybit