With 37% of the 535 senators and representatives in the United States Congress having received political campaign money from either former FTX CEO Sam Bankman-Fried or FTX’s senior executives, the new session of Congress began with a lot of FTX baggage.
Among the 196 members of Congress are prominent politicians from both the Republican and Democratic parties, such as new House Speaker Kevin McCarthy, Democratic House Minority Leader Nancy Pelosi, Senate Majority Leader Chuck Schumer and Republican Senate Candidate Mitt Romney.
Charitable donations
Most of the responding politicians stated they donated money to charity to remove the taint of contributions from former FTX CEO Bankman-Fried.
Some have come out to say that they have discussed putting the money away with the U.S. Department of Justice to eventually deposit it into a fund to pay victims of FTX.
Some 38% of the Congress members who responded to CoinDesk said they are hanging on to the donations until they are given formal government guidance on returning the money. However, just five of the M.P.s have claimed that they have effectively repaid the money.
Politicians and charitable organizations face challenges in transferring funds because of FTX’s Chapter 11 bankruptcy and the necessity to account for and recover as much money as possible.
‘Tough luck’
Suppose donations made by FTX executives to political campaigns or other organizations are judged fraudulent conveyances during the bankruptcy proceeding. In that case, the recipients will be required to repay the funds to FTX’s estate.
According to a bankruptcy specialist and law professor at St. John’s University Anthony Sabino, this might take a very long time.
It’s “tough luck,” Sabino said if the given funds have already been used. It’s very terrible if you don’t have the cash anymore, he remarked. He said. “You are still liable. You might go bankrupt yourself.”
Tom Emmer (R-MN) is one of several lawmakers that got FTX funding. He is a staunch supporter of cryptocurrencies and will be a key player this year in determining the fate of crypto legislation in the United States. Despite its simplicity, the irony feels rich.
Personal money
Until a legal determination emerges that the funds should be considered part of the company’s bankruptcy, Sabino, the St. John’s professor, said a clawback process does not affect donations Bankman-Fried made with his own money. This is because all direct contributions politicians are scrambling to cleanse from their campaigns came from the executives’ money.
Prosecutors believe that Bankman-Fried disguised the origin of the money he sent to the campaign, which is why he is being charged with fraud. However, there are few details about the allegations. However, it is still being determined if the same level of scrutiny will be applied to donations made by Salame and others.
Analysis of federal data shows that Bankman-Fried frequently donated many times, exceeding the statutory restrictions for individual contributions. This may cause further uncertainty. The limit for this election cycle was $2,900 per election or $5,800 for both the primary and general.
Only a few dozen unsuccessful candidates received donations from FTX executives, who mostly supported those already in power. Bankman-Fried contributed publicly to 10 Republican politicians, despite the widespread speculation about his hidden financial ties to Democrats.
Specter of SBF
37% of members of Congress who accepted FTX contributions are considering whether the United States should regulate cryptocurrencies in a manner similar to that advocated by Bankman-Fried. The devastation caused by FTX will be front and centre in discussing whether or not to enact regulations regulating crypto assets in this session.
Social media users have been boasting that the contentious crypto regulatory bill Bankman-Fried backed is dead after his detention. Still, experts predict that the measure and other legislative efforts will continue.
Jenny Lee, a partner at Reed Smith’s Financial Industry Group and a former enforcement attorney at the Consumer Financial Protection Bureau, said that the fact that Bankman-Fried has extensive contacts with politicians would not be fatal to the work.
Many legislators who benefitted from the crypto windfall of FTX’s political greenhorns have spoken out harshly against the company’s leadership and called for strict regulation. As a result, as crypto legislation develops, the business encounters legislators who believe digital-asset proponents burned them in the past.
