Decrypt’s Art, Fashion, and Entertainment Hub.
The team overseeing FTX's bankruptcy proceedings has warned that donations made by former CEO Sam Bankman-Fried or other executives should be returned.
Since the exchange filed for bankruptcy in November, FTX's operations are now overseen by its new CEO John J. Ray III.
FTX said the exchange had already “been approached by a number of recipients of contributions or other payments” made by or at the direction of Sam Bankman-Fried or other officers.
“These recipients have requested directions for the return of such funds,” FTX said in a statement, adding that it’s “working with these recipients to secure the prompt return of such funds.”
Sharing our press release just issued: FTX Debtors Announce Process for Voluntary Return of Avoidable Payments https://t.co/l57F7zgKPJ
— FTX (@FTX_Official) December 19, 2022
In the months preceding the collapse of FTX, Bankman-Fried made an estimated $46.5 million in political donations. A public spreadsheet shared by OpenSecrets.org, a nonprofit that tracks U.S. campaign finance and lobbying, shows that a significant chunk of those donations—over $1.26 million—has gone to Democratic candidates.
FTX further said that if political contributions are not returned “voluntarily,” it intends “to commence actions before the Bankruptcy Court to require the return of such payments.”
According to the exchange, “recipients are cautioned that making a payment or donation to a third party (including a charity) in the amount of any payment received from [FTX] does not prevent the FTX Debtors from seeking recovery from the recipient or any subsequent transferee.”
Politicians give FTX donations to charities
Politicians, including Sen. Dick Durbin (D-IL), Sen. Kirsten Gillibrand (D-NY), Rep. Jesus Garcia (D-IL), and Sen. John Boozman (R-AR), stated they had donated the money received from Bankman-Fried to charities.
Former Rep. Beto O’Rourke (D-TX) said he returned a $1 million donation to Bankman-Fried a week before FTX filed for bankruptcy, while the White House last week refused to clarify whether it will return any political donations made by SBF to President Joe Biden.
A spokesperson for Rep. Smith (D-MN) told Decrypt that "Senator Smith has already donated the campaign contributions from Mr. Bankman-Fried to Planned Parenthood North Central States. However, we are closely following the ongoing developments around the allegations of campaign finance violations, and if the payments are clawed back, we will, of course, do whatever is necessary to help make the victims whole."
A recent AP report revealed more politicians who moved to send the FTX contributions to charities, with incumbent Rep. Carolyn Bordeaux (D-GA-07) saying that “the dilemma surrounding Bankman-Fried’s campaign spending isn’t as simple as returning individual donations.” In some cases, according to Bordeaux, “the money already has been used to affect elections.”
The larger issue at play, however, is political action committees (PACs)—technically independent expenditure-only organizations that influence elections in the U.S. on a federal and state level.
“That’s not something they can refund. Here is an example of a billionaire using money he stole and diverted into political contributions—it’s an egregious example of the corruption in our political system,” Bordeaux told AP.
According to OpenSecrets, FTX gave over $41 million to PACs, which can accept unlimited individual and corporate contributions, however, they must remain formally separate from campaigns as they run ads or sponsor other communications supporting or opposing candidates.
The largest recipient of FTX money—as much as $27 million—is identified as a Democratic Protect Our Future PAC, which describes itself as an organization “designed to help elect candidates who will be champions for pandemic prevention.”
Other big names on the list include House Majority PAC, Future Forward USA, GMI PAC, America United, and Senate Majority PAC.
Decrypt has reached out to Protect Our Future, GMI PAC, and Senate Majority for comments and will update this article accordingly should we hear back.