This week saw the charging and arrest of George Santos, the comically inventive Long Island Congressman. Almost unbelievably, Santos is connected to another apparently inveterate liar: Sam Bankman-Fried, the multiply-indicted founder and former CEO of collapsed crypto exchange FTX. Bankman-Fried’s ties to Santos were just a footnote to Bankman-Freid’s sprawling political influence campaign, seemingly funded in large part with stolen customer funds.
The goal of that campaign, however clumsily pursued, may have been the passage of a piece of cryptocurrency legislation, the Digital Commodities Consumer Protection Act, or DCCPA. Many have argued that the DCCPA would have benefitted FTX at the expense of the broader crypto ecosystem – and maybe even allowed Bankman-Fried to keep his gargantuan embezzlement scheme going.
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To catch a pretender
George Santos seems to have told an array of lies about his biography and resume, including that he’s Jewish, a former Broadway producer and both the survivor of an assassination attempt and the son of a 9/11 survivor. The lies are almost as entertaining as they are infuriating, suggesting not so much strategic deception as some form of mental illness.
But this week's charges against Santos are serious, and a little sad: he faces 13 criminal counts including money laundering and wire fraud. This includes allegedly embezzling $50,000 in campaign funds to buy himself fancy clothes.
According to public records uncovered in December of 2022, Santos’ donors included three figures from the FTX circle. The Santos campaign reportedly received the maximum possible individual donation from FTX senior exec Clare Watanabe, product head Ramnik Arora and Ryan Salame, CEO of the company's Bahamian subsidiary FTX Digital Markets, who gave upwards of $24 million to Republican candidates and committees during the midterms.
This information was puzzling when it first emerged – Santos had no clear connection to FTX, and no apparent interest in crypto or any other issues Bankman-Fried feigned concern about. According to Puck News, though, the explanation for the Santos connection is relatively straightforward. Salame’s girlfriend, Michelle Bond, former CEO of the FTX-backed crypto trade group Association for Digital Asset Markets, ran for Congress in 2022 as a MAGA Republican, in a district near Santos’.
The FTX executive donations went to Santos as part of an agreement with Bond to “swap” donors who had hit the individual limit for donations to the partner candidate. In other words, FTX execs gave money to Santos not because they supported him, but as part of supporting Bond. Puck characterizes such swaps as fairly routine in political campaigns. But Salame was deeply entwined with other aspects of the FTX hustle. Though he has not yet been charged with any crime, the $4 million home he shares with Bond was raided by the FBI in late April.
Effective egotism
While not seemingly criminal in its own right, the arcane connection between FTX and George Santos reflects the sprawling nature of Sam Bankman-Fried’s larger political influence campaign in 2021 and 2022. In the months since FTX’s collapse and Bankman-Fried’s arrest, it has become clear that these political efforts were as corrupt as every other aspect of his dealings.
The mountain of criminal charges against Bankman-Fried include violating campaign finance laws by allegedly funneling (allegedly stolen) corporate funds through so-called “straw donors,” including Salame and FTX co-founder Nishad Singh, to circumvent the law. The straw donor scheme seems to have been intended mainly to disguise the fact that, while positioning himself as the next Democratic mega-donor, Bankman-Fried was in fact funneling donations to both Republicans and Democrats.
But this is just the beginning of an apparently even more sprawling and frankly very weird set of relationships among a huge cast of political hustlers.
In one striking example, a source told Puck that they received a donation from Nishad Singh even though they had cultivated a relationship with Mind the Gap, a pre-FTX fundraising organization spearheaded by Sam Bankman-Fried’s mother, Barbara Fried. This suggests Mind the Gap may have helped identify candidates who then received donations of stolen FTX customer funds.
Another seemingly major nexus of the FTX influence-peddling effort was Democratic strategist and fundraiser Sean McElwee, who reportedly helped guide donations for Bankman-Fried. It was also recently revealed that McElwee had gambled on political contests, including betting against candidates he was working for. Though McElwee hasn’t faced any legal fallout, those two dings reportedly led to his December 2022 firing as head of Data for Progress, an extremely influential left-leaning think tank and polling firm he founded in 2018.
The long game
These are just a few highlights of a truly Byzantine operation. But what was Sam Bankman-Fried hoping to gain by spreading so much money around, by such deceptive means?
Publicly, Bankman-Fried used his political donations to buttress his carefully-crafted (and admittedly fake) image as a concerned philanthropist. For instance, another seeming middleman for FTX funds was Sam’s younger brother Gabe Bankman-Fried, who was placed in charge of a political advocacy nonprofit called Guarding Against Pandemics (GAP). The organization’s main source of funding was FTX.
GAP’s political efforts appear to have been thoroughly hamfisted and ineffectual. Guarding Against Pandemics spent unprecedented sums in an Oregon House race, but its candidate lost. GAP also intervened in a Colorado ballot initiative and managed to alienate parties it was nominally collaborating with. Michelle Bond, meanwhile, lost her House primary race by an embarrassing 20 points. The combined ineptitude and corruption on display is a revealing parallel to Alameda Research’s ability to lose massive amounts of money despite seemingly having a cheat code on FTX.
But even if you’re incompetent, throwing tens of millions of dollars around clearly counts for a lot in Washington, D.C. Bankman-Fried’s donations likely helped him win meetings with the likes of U.S. Securities and Exchange Commission (SEC) Chair Gary Gensler, and invitations to testify before Congress about crypto. Gensler and others seemed eager to welcome Bankman-Fried as an “adult in the room” on crypto regulation.
But many in the industry were hostile to the DCCPA legislation that Bankman-Fried helped craft, and which would have imposed onerous and even nonsensical requirements on decentralized finance (DeFi) platforms and services. Many argued that the rules would have amounted to a ban on DeFi in the U.S., and would have channeled more crypto into centralized entities – including FTX itself. That might have saved FTX from collapse and helped keep Bankman-Fried’s many alleged crimes secret.
As we move closer to Bankman-Fried’s scheduled October criminal trial, the theft of customer funds will be a dominant issue for many crypto industry observers. But that’s just one part of an even darker allegation: that Bankman-Fried, with help from many allies, used those stolen funds to pervert the legislative process of the United States towards his own entirely self-interested goals.