Sam Bankman-Fried’s newfound infamy has given cryptocurrency regulators an opportunity to unravel the former billionaire’s lobbying efforts. Lawmakers will be pressed to reassess their approaches to digital assets, Politico reports.
Over the past few years, Bankman-Fried has used his fortune to become one of the biggest crypto influencers in Washington. The entrepreneur recently announced he would donate $1 billion to influence the next US presidential election and spend “north of $100 million” in the midterm elections. He backtracked — only $40 million went to political action committees (PACs) and campaigns, mostly leaning Democratic.
Still, Bankman-Fried was the second largest Democratic donor to outside spending groups in 2022.
Dollar spend on crypto lobbying has quadrupled to $9 million since 2018, the Financial Times (FT) noted this summer. The number of crypto lobbyists doubled in that same time period, from 115 to 320. In 2021, all four of FTX.US’s lobbyists were previous government workers — this year, 10 out of 13 used to be.
Additionally, Bankman-Fried gave $3.5 million to the GMI PAC, which gave $5.8 million to a pro-crypto super PAC, Web3 Forward. He further donated $155,000 to right-wing PACs which all supported a crypto-friendly candidate, FT reports. These candidates include two chief politicians — on both sides of the aisle — with seats on the Senate agriculture committee that oversees crypto.
Yet, Bankman-Fried has also made poor lobbying decisions. Notably, he injected $13 million into hybrid PAC Protect our Future. It deployed $11.3 million in outside funding to political candidate Carrick Flynn — who went on to dramatically lose in the Democratic primary for Oregon’s 6th congressional district.
Now, it seems that some of Bankman-Fried’s stained donations could be returned. Recipients aren’t obligated to pay back his offerings, but given recent events, it seems likely that some won’t want the association.
John Coffee, a professor at Columbia Law School, told FT: “I do not see the political recipients of Bankman-Fried’s donations as personally liable, but they may be embarrassed into returning these donations.”
Earlier warnings of Bankman-Fried and his lobbying
The spectacular downfall of crypto exchange FTX and trading firm Alameda Research, the latest two major crypto dominoes to topple, has left Washington pointing fingers. According to Politico, regulators are being blamed, including the SEC and the Commodities and Futures Trading Commission (CFTC) — which Bankman-Fried heavily endorsed as the leading body to regulate crypto. He even hired a former CFTC commissioner.
It should be noted that recent events have confirmed warnings frequently voiced by crypto experts: that politicians shouldn’t be swayed by the industry’s cash. Back in June, a group of 26 top tech experts and academics sent a letter to lawmakers asking them to take a skeptical approach to crypto lobbyists.
“We urge you to resist pressure from digital asset industry financiers, lobbyists, and boosters to create a regulatory safe haven for these risky, flawed, and unproven digital financial instruments and to instead take an approach that protects the public interest and ensures technology is deployed in genuine service to the needs of ordinary citizens,” it read (our emphasis).
According to Politico, recent events have left a big impression on lawmakers that will hopefully make them reevaluate the need for crypto regulation. While both sides of the aisle have lost a major donor in Bankman-Fried, it remains to be seen if the gaping wound will stay empty for long.