By Mark Tapscott
Members of Congress from both sides of the aisle are calling for congressional action in the wake of the Chapter 11 bankruptcy filing by FTX Trading Ltd., the world’s second-largest cryptocurrency exchange, which was founded by Democrat mega-money man Sam Bankman-Fried.
The cryptocurrency market consists of hundreds of billions of digital financial assets and is viewed by advocates as the eventual replacement for hard money. As a major player in the industry, FTX represented an estimated 130 related corporate entities around the world.
The bankruptcy filing affects most of them, including Bankman-Fried’s crypto hedge fund Alameda Research and FTX US, but not subsidiaries FTX Australia Pty., FTX Express Pay Ltd., and others.
Bankman-Fried has acknowledged that he “[expletive]-up” and expressed regret for his management errors.
It initially appeared that approximately 100,000 creditors would be affected by the bankruptcy, but an amendment to the filing said the total may actually be closer to one million.
“The recent collapse of FTX is a loud warning bell that cryptocurrencies can fail, and just like we saw with over-the-counter derivatives that led to [the 2008] financial crisis, these failures can have a ripple effect on consumers and other parts of our financial system. The cryptocurrency market’s continued turmoil is why we must think carefully about how to regulate cryptocurrencies and their role in our economy,” Senate Committee on Banking, Housing, and Urban Affairs Chairman Sherrod Brown (D-Ohio) said in a statement.
“It is crucial that our financial watchdogs look into what led to FTX’s collapse so we can fully understand the misconduct and abuses that took place. I will continue to work with them to hold bad actors in crypto markets accountable. I’m committed to finding the best path forward to protect consumers and the stability of the U.S. markets and banking system,” Brown said.
Sen. Pat Toomey (R-Pa.), the ranking minority member of the Senate panel, is retiring, as is the second-in-line, Sen. Richard Shelby (R-Ala.). Sen. Mike Crapo (R-Idaho), who is expected to succeed Toomey as the top Republican on the committee, could not be reached for comment.
On the House side, with Republicans poised to regain control when the 118th Congress convenes Jan. 3, 2023, Rep. Patrick McHenry (R-N.C.) is likely to take over from Rep. Maxine Waters (D-Calif.) as House Financial Services Chair.
A spokesman for Waters did not respond to The Epoch Times’ request for comment.
McHenry issued a statement declaring that, “For years, I have advocated for Congress to develop a clear regulatory framework for the digital asset ecosystem, including trading platforms. The recent events show the necessity of congressional action. It’s imperative that Congress establish a framework that ensures Americans have adequate protections while also allowing innovation to thrive here in the U.S.”
But new regulations to cover the emerging cryptocurrency field of financial activity will not be the only focus of the coming congressional attention to the issue, thanks to the role of its chief competitor and the extensive political contributions of the failed exchange’s chief executive officer, Sam Bankman-Fried, and his close associate Ryan Salame.
As The Epoch Times previously reported, the FTX crash began when the top executive of its biggest competitor, Binance, tweeted statements questioning the solidity of Bankman-Fried’s position.
Binance CEO Changpeng Zhao’s posted messages also announced that it was getting rid of its holdings in an FTX entity. “We will try to do so in a way that minimizes market impact. Due to market conditions and limited liquidity, we expect this will take a few months to complete,” Zhao said.
The political contributions will be a focus because Bankman-Fried, whose personal worth was estimated at $16 billion prior to the bankruptcy filing, has been a prolific donor to Democrats in Congress and on the national political scene.
Bankman-Fried gave nearly $40 million during the 2022 election cycle, according to opensecrets.org, making him the sixth biggest individual political contributor in the country and the second largest Democrat contributor.
The biggest chunk of Bankman-Fried’s largesse, $27 million, went to a Democratic political action committee (PAC), Protect Our Future. He gave $5 million to President Joe Biden’s 2020 campaign. He has also said he might give as much as $1 billion to Biden and the Democrats during the 2024 campaign.
But Bankman-Fried also gave to a few Republicans, including Sen. John Hoeven (R-N.D.) and Sen. John Boozman (R-Ark.).
It is not uncommon for corporate special interests to give campaign contributions to both sides in political races and FTX was no different in that respect. Salame, who was CEO of FTX Digital Markets, Inc., was a prolific Republican donor, with a total of nearly $24 million, according to opensecrets.org. Those contributions made Salame the 14th biggest individual donor in the 2022 cycle and the 10th largest among the Republicans.
At least two recipients of contributions from Bankman-Fried or Salame-linked sources—Rep. Kevin Hern (R-Okla.) and Rep. Chuy Garcia (D-Calif.)—have reportedly either returned the funds or transferred them to charities.
Within hours of the FTX bankruptcy, social media was alive with claims that Bankman-Fried was part of an elaborate operation in which billions of U.S. tax dollars given by Biden and Congress as aid to Ukraine in its defense against the Russian military invasion were subsequently reinvested in the cryptocurrency entity and then doled out to Democrats.
Brian Darling, former general counsel to Sen. Rand Paul (R-Ky.) and now head of Liberty Government Affairs, expressed doubt about the claims.
“The whole theory of FTX having a link to the Democratic Party and Ukraine is one that needs to be looked at to either dispel a conspiracy theory or to see if there were any shenanigans. Way too early to take these allegations to the bank,” Darling told The Epoch Times.