An excerpt from Andrew R. Chow's "Cryptomania" details Sam Bankman-Fried's insidious influence campaign in Washington D.C.
This essay is an excerpt from Cryptomania, the newly released book from TIME technology correspondent Andrew R. Chow, which chronicles the pandemic-era rise and fall of crypto, and of mogul Sam Bankman-Fried.
In 2022, it was hard to walk around Washington without seeing Sam Bankman-Fried’s face. While the press often praised him for his humility, the founder and CEO of the crypto exchange FTX plastered ads of himself all over the city, and particularly in areas where congressional staffers might walk to work, like Union Station. Although Sam still lived in the Bahamas in order to avoid regulation, he was shuttling from Nassau to Washington, D.C., every week or two to meet with lawmakers and regulators, making a power play for the nation’s capital.
[time-brightcove not-tgx=”true”]After FTX’s crash, theories would fly about Sam’s larger designs on Washington. Some speculated that he had been angling to move FTX back to U.S. soil and carve out concessions to make it the top crypto company in the country. Others believed he was laying the groundwork for a political career himself. A less charitable theory was that he hoped to pre-emptively seek federal leniency for the illegal activity he knew he was already committing.
Whatever Sam’s long-term goals were, he made his short-term aims plenty evident: he stumped for a friendlier regulatory climate for crypto companies in the U.S., so that he could sell more crypto products to Americans. Getting favorable legislation seemed feasible in 2022, given how much national excitement there was about crypto—and how little lawmakers actually understood it.
Sam’s approach to Washington was two-pronged. The first was a charm offensive, involving high-profile hearing appearances and closed-door meetings with members of Congress and regulatory officials. The second was a donations blitzkrieg for crypto-friendly candidates, which was led by Sam’s younger brother Gabe. Sam’s money and sudden omnipresence in Washington sent shock waves through the Democratic Party establishment. “Washington is a place where the power structure is more or less set,” says a former member of the Treasury Department. “And Sam disrupted it.”
Read More: The Bombshell Evidence That Led to Sam Bankman-Fried’s Conviction
Sam testified in front of Congress multiple times, with his first appearance in December 2021. At this point, around $15 billion in assets were traded daily on FTX, and its market share was rapidly growing. Sam used his testimony to argue both that crypto improved upon traditional finance, and that FTX improved upon crypto. He criticized the way that the 2008 financial crisis had been precipitated by “bilateral bespoke nonreported transactions” piled up onto each other, lacing the entire financial system with hidden risk. FTX, in contrast, boasted a “risk -engine”: a suite of automated tools to minimize unforeseen losses and weed out bad actors in the system, Sam claimed. He added that if too many customers made bad bets, FTX had a $250 million insurance fund to absorb customer losses. FTX’s financial cushion and its cutting-edge technology, he argued, would “ensure a customer without losses can redeem its assets from the platform on demand.”
Many lawmakers found his speeches persuasive. “It sounds like you’re doing a lot to make sure there is no fraud or other manipulation,” Representative Tom Emmer, who was elected as the GOP’s majority whip in 2022, told him at the December 2021 hearing.
“There were a lot of stars in people’s eyes watching that: folks on both the Democratic and Republican sides that were very taken with SBF,” says congressional staffer Devina Khanna.
But virtually none of the above descriptions about Sam’s business, which he made under oath, were true. While he attempted to portray FTX as the opposite of the shadow banks of the 2000s, he was mirroring their actions by leveraging and repackaging dubious and risky assets. Although FTX’s risk engine was innovative and mostly effective, Sam knew that a single account was exempt from ever getting auto-liquidated: his own trading firm, Alameda Research. That team, which was run by Sam’s on-and-off girlfriend Caroline Ellison, could take a virtually unlimited line of credit from FTX without getting flagged for internal review, and use it to make bigger and bigger trades. At this point, Alameda was already secretly borrowing billions from FTX’s pool of money. The insurance fund that Sam advertised was fake too. While the FTX website stated at the time that the platform had $250 million stashed away for a rainy day, that number was completely made up, and generated by a bit of code.
As Sam stumped in front of Senators, he enlisted his younger brother Gabe to help bring new crypto-friendly faces to Congress’s halls. The brothers spun up a nonprofit called Guarding Against Pandemics and an affiliated super PAC called Protect Our Future. Sam quickly funneled $27 million to the PAC, whose ostensible goal was to promote candidates who prioritized anti-pandemic research and prevention. “He thought it was very effective, that you could get very high returns in terms of influence by spending relatively small amounts of money,” Ellison, who later pled guilty to fraud charges, testified about Sam’s fundraising.
At first, Protect Our Future did support candidates who seemed equipped to guard against future pandemics. But D.C. insiders say that late in the campaign cycle, a clear pattern emerged of the Bankman-Frieds’ donating based not on ideology, but on likelihood of victory. “They switched to ‘We’ll give $500,000 to anyone who already has this locked up—that way, they’ll be forever in our debt,’” a D.C. operative tells me. “There was no ideological consistency to who they gave money to in the last four to five months. It was a lot more silly than strategic: more Veep than West Wing.”
Sam ended the 2022 election cycle as the third biggest individual public Democratic donor of the midterms, trailing only Michael Bloomberg and George Soros. But he was secretly funding Republicans too. “We will be heavily putting money to weed out anti-crypto dems for pro-crypto dems and anti-crypto repubs for pro-crypto repubs,” Ryan Salame, an FTX executive and one of Sam’s closest allies in the Bahamas, wrote to a confidant in a text.
FTX’s financial-influence campaign largely unfolded over a Signal group chat. Sam was on the chat, as was FTX’s top engineer Nishad Singh, who fronted $14 million in donations to Democrats—even though he grumbled in messages about having to support “explicitly-woke stuff” like the LGBT Victory Fund. Salame, in turn, flowed more than $23 million to Republicans in 2022, including the maximum to Tom Emmer. (FTX also doled out $200,000 to New York Republican Michelle Bond, a Donald Trump Jr.–endorsed congressional candidate who happened to be Salame’s girlfriend.) Financial-forensics experts would later trace much of the money for political donations—ostensibly given by Singh and Salame—back to Alameda bank accounts, and then back to transfers pulled from FTX customer deposits.
Sam was playing both sides: a logical end point to his nihilist approach. The ideological principles of the candidates he gave money to didn’t matter. All that mattered was that he continued to amass power himself. Many other crypto executives saw Sam’s successes in Washington and followed his lead: more than $26 million flowed from crypto companies to political races in 2021 and the first quarter of 2022, outpacing spending from Big Pharma, Big Tech, and the defense industry.
All in all, an astounding 196 members of Congress—more than a third of all Senators and Representatives—received cash from Sam Bankman-Fried or other senior executives at FTX. And Sam announced that he had only scratched the surface of his largesse: that he was aiming for a $1 billion “soft ceiling” for the 2024 election.
A new kingmaker had arrived in Washington, it seemed. But by the end of the year, Sam Bankman-Fried would be in handcuffs.
