Before his precipitous fall from grace, Sam Bankman-Fried was crypto's friendly face. His persona wasn't just for customer consumption, but was also aimed at lawmakers. He lobbied politicians across both parties with his air of technocratic competence, and tens of millions of dollars in donations.
Now, months after the company went bankrupt, FTX's debtors want those donations back. In a press release issued on Sunday, the crypto exchange's debtors announced they're sending confidential letters to politicians and political action funds seeking the return of donations made by Bankman-Fried and other FTX personnel.
Those same debtors previously estimated that Bankman-Fried dropped $93 million in political donations. FTX's debtors are at present relying on donations to be returned voluntarily, but say they "reserve the right to commence actions before the Bankruptcy Court" to force the funds' return.
Bankman-Fried was the Democrats' second largest donor between 2020 and 2022, contributing over $37 million towards the blue party's election efforts, according to fund-tracking website Open Secrets. Top FTX executive Ryan Salame donated $19 million to GOP candidates in the same period.
FTX was among the world's biggest cryptocurrency exchanges until late last year. Its implosion began on Nov. 2, when the company's finances were leaked to CoinDesk. The publication found that over one third of the $14.6 billion in assets owned by Alameda Research, Bankman-Fried's investment firm, were FTT tokens, a cryptocurrency issued by FTX. In other words, the foundation of Alameda's finances was an asset issued by its sister company. Alameda Research was then discovered to be $8 billion in debt, with FTX having transferred customer funds to Alameda to plug the hole, leading to the exchange's inability to service customer withdrawals.
John Ray III, the attorney who oversaw efforts to recover funds lost in Enron's infamous accounting scandal, was in November appointed FTX's new CEO. For that position he plans to investigate where the exchange's funds went and how they can be recovered.
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," Ray wrote in a bankruptcy court filing.
The Department of Justice is also on the case. Bankman-Fried, whose net worth was estimated to be $16 billion before his companies' crash, was charged with eight counts of money laundering and fraud in December. He pleaded not guilty. The DOJ seized more than $455 million worth of stocks owned by Bankman-Fried and fellow FTX co-founder Gary Wang in January, and another $150 million in assets later that month.