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Wednesday, February 21, 2024

FTX Lawyers Escalate Threats To Politicians: Return Donations Or Be Sued

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FTX bankruptcy attorneys sent out private letters last week to politicians and PACs who received donations from the company, giving them until Feb. 28 to return the money voluntarily or face legal action.

According to a company statement, “to the extent such payments are not returned voluntarily, the FTX Debtors reserve the right to commence actions before the Bankruptcy Court to require the return of such payments, with interest accruing from the date any action is commenced.”

Based on data from the Federal Elections Commission (FEC), Coindesk, a cryptocurrency news site, identified 196 U.S. senators and representatives who accepted FTX donations. Meanwhile, Unusual Whales, a retail trading platform, compiled their own tally of political recipients of FTX money, who donated to whom, and whether or not the money was returned.

Legal experts say it would probably be wise for the politicians to comply with FTX attorneys’ request before things go to court.

“John Ray [CEO of FTX in bankruptcy] and his team will likely pursue fraudulent transfer litigation against politicians and PACs if they do not return the funds, as FTX has repeatedly requested,” Thad Wilson, a partner and bankruptcy expert at King & Spalding, told The Epoch Times.

Even though politicians may have a legal defense, he said, going to court would be expensive, and those who received only a few thousand dollars “would probably be better off returning the money. For larger recipients, like PACs and parties, the economics may look very different.”

Wilson cited the precedent of Craig Berkman, a financier charged by the SEC with defrauding investors, who had donated to the presidential campaigns of John McCain, Mitt Romney, Mike Huckabee, and Rudy Giuliani in 2007–2008.

“After Berkman filed for bankruptcy in 2009, many of the campaigns and candidates who received funds from Berkman were sued and/or returned the funds to Berkman’s bankruptcy trustee,” Wilson said.

FTX Founder Sam Bankman-Fried, together with other top FTX executives, lavished more than $70 million on politicians and political organizations leading up to the 2022 midterm elections, making FTX the third-largest political donor and Bankman-Fried the second-largest donor to the Democratic Party after George Soros.

According to data collected by the Committee to Unleash Prosperity, led by economist Stephen Moore, Bankman-Fried himself gave $40 million, mostly to Democratic candidates.

His co-CEO, Ryan Salame, reportedly gave more than $20 million to Republicans and conservative groups. And FTX engineering director Nishad Singh reportedly gave nearly $13 million to Democrats and left-wing causes.

Bankman-Fried was arrested for securities fraud in December, following the collapse of FTX, his Bahamas-based cryptocurrency exchange, and Alameda Research, his crypto hedge fund.

He was subsequently extradited to the United States to face criminal charges that included securities fraud, wire fraud, money laundering, and campaign finance violations. He was quickly released on a $250 million bond and is residing at his parents’ home in California, which was put up as collateral for the bond.


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