In April, when cryptocurrency guru and Democratic mega-donor Sam Bankman-Fried explained how crypto tokens work in cryptocurrencies. bloomberg podcast, the host said it sounded like being in a “Ponzi business.” Bankman-Fried, founder of cryptocurrency exchange FTX, responded that this was a “very reasonable response” and had “depressing validity”.
Conversation — Days After One of Washington’s Top Industry Regulators murmured A picture with Bankman-Fried — perhaps it should have set off alarm bells in Washington DC and the financial industry at large. It wasn’t.
On Friday, FTX, which previously had $16 billion in client assets, $32 billion In its latest investor funding round in September, submitted About bankruptcy in Delaware. His Bankman-Fried, 30, has stepped down as his CEO.
The collapse has left the $849 billion cryptocurrency industry One-fifth from last week’s high 3 trillion dollars A Year Ago — It’s been protected by regulators sleeping in the driver’s seat while unlucky ordinary investors are sucked into slick advertising from celebrities. celebrity When athleteyou lose your savings.
Several days After Bankman-Fried’s prescient comment, bloomberg Podcast co-sponsored by FTX crypto conference In the Bahamas with world leaders, celebrities and investors. Bankman-Fried was on stage interviewing former President Bill Clinton and former British Prime Minister Tony Blair, wearing her shirt, shorts and New Balance sneakers.
according to the industry PublicationClinton proposed that regulators should adopt a “do no harm” mentality when dealing with cryptocurrencies. Politico announced the event told The “weird new splendor” of the crypto industry.
At the time, Bankman-Fried was a political kingmaker, backing crypto-friendly candidates in a series of Democratic congressional primaries, taking advice from veteran Democratic consultants and young quasi-left startups. had established its position. Bankman Fried in May Said NBC News He aimed to spend up to $1 billion on the 2024 election.
Now, just six months later, FTX has completely collapsed.according to wall street journalFTX “set the stage for the exchange’s implosion by lending billions of dollars worth of client assets to fund risky bets by affiliate trading firm Alameda Research.”
The collapse was quick: When rival cryptocurrency exchange Binance announced on Nov. 6 that it would be unholding digital tokens issued by FTX and in which Alameda had heavily invested, customers said: began to withdraw their money From Tokens and FTX. Bankman-Fried announced on November 8 that Binance would acquire his FTX, but Binance is pending due diligence before withdrawing from the deal. Soon, FTX ran out of money.
Members of Parliament are I’m raising my outlook now The bigger question still remains: how have regulators allowed the crypto industry to operate with little scrutiny for so long? Why did the Politics and Consulting Classes accept and prosecute Bankman-Fried’s intervention in Democratic politics?
A former law professor at Stanford University, Bankman-Fried entered the cryptocurrency industry in 2017 by founding his company Alameda Research. His first trade focused on capitalizing on the price differential between Bitcoin in the US and Japan.
Generally speaking, cryptocurrencies are Decentralized digital form of moneyBitcoin is the most successful and best known crypto, but there are thousands of others. One in five of his American adults owns some form of cryptocurrency, according to January Morning Consult poll.
bankman freed Reported value of $26 billion, who rose to prominence in politics after donating $5 million to Super PAC in 2020 to support Joe Biden’s presidential campaign.The donation brought him fluffy profile of New York The magazine’s headline reads, “Mysterious cryptocurrency kingpin turned into one of Biden’s biggest donors.”
This year, Bankman-Fried spent millions of dollars to decide the Democratic primaries and donated thousands of dollars to Democratic lawmakers overseeing the crypto industry.
Bankman-Fried started by funding a super PAC called Protect Our Future, which intervenes in Democratic primary elections. His $10 million ad blitz for the group, designed to win the virtually unknown candidate Carrick Flynn in the Oregon primary, fell through, but other spending has been highly effective. did.
Protect Our Future spent $1 million to help re-elect Democrat Ohio Rep. Shontelle Brown, who was facing a major competitive challenge from progressive Nina Turner. Brown has important committee duties. She sits on both the House Agriculture Committee and the Oversight Committee, which oversees the Commodity Futures Trading Commission, one of the key regulators of the cryptocurrency industry. Subcommittee The chairman is investigating the cipher.
Bankman-Fried Super PAC also helped Democratic Rep. Lucy McButh successfully navigated the highly competitive Georgia primary and assisted the primary campaign of Florida progressive candidate Maxwell Frost, who had just won the election.
In the process, Bankman-Fried has taken on the Democratic consulting industry heavyweights and the younger political parties, which are generally perceived as progressive but spend much of their time attacking left-wing policy proposals. I built relationships with nearby operatives. in the media.
Sean McElwee, first executive director of polling firm Data for Progress, said: advised bankman fried.progress data received $48,000 From Protect Our Future in June. Bankman-Fried, McElwee, and Data’s fellow David Shor co-hosted a fundraiser this spring for his Ritchie Torres, the New York Democratic Party Rep. intercept.
Other consultants worked To protect our future, this election cycle includes: A global strategy group that works with the official Democratic Commission.The polling firm Melman Group is headed by Mark Melman Leads a pro-Israel Super PAC dedicated to crushing progressives in primaries.
Rep. Sean Casten, a Democrat from Illinois, hired Bankman-Fried’s brother and adviser Gabe as his attorney. Aide From 2019 to 2021. Casten later became a member of the Democratic “Digital Assets Working Group” on the House Financial Services Committee focused on crypto. Casten did not immediately respond to requests for comment from officials. lever.
As Bankman-Fried sought to make his mark on the electoral arena, he also regularly attended the Capitol, ostensibly helping lead regulation of the industry in his early years.
Bankman-Fried and FTX helped release A cryptocurrency lobbying group called the Association for Digital Asset Market (ADAM) patella Aggressive new leadership of the Securities and Exchange Commission (SEC).use invoice ADAM, promoted by Democratic New York Senator Kirsten Gillibrand and Republican Wyoming Senator Cynthia Ramis, instead replaced the much smaller and underfunded Commodity Futures Trading Commission (CFTC) as a monopoly. I tried to position myself as a regulator.
Former Lumis advertised A statement from ADAM on her website promoting legislation. The webpage has since been deleted. ADAM’S OWN HER WEBSITE Already used list FTX General Counsel Ryne Miller as a member of the organization’s Board of Directors.his name is now It was deleted.
Bankman-Fried combined behind-the-scenes lobbying through both ADAM and his own company. Spent It has lobbied $670,000 this year and is publicly criticized for how cryptocurrencies really need to be regulated.
“[The US should] We will be able to strike a balance between promoting economic growth and providing consumer protection, and protecting against systemic risk and financial crime. ” bankman freed said In a February interview with the Economic Club of New York.
Bankman-Fried’s remarks to New York’s elite came as SEC Chairman Gary Gensler began taking a tougher stance on cryptocurrencies.Gensler warned last year Most trading platforms must be registered with an agency and the SEC almost double the size That special unit polices the crypto.
As such, the industry has begun to seek to delegate regulatory oversight to the CFTC. The CFTC is a relatively marginal agency originally tasked with overseeing agricultural futures contracts and does not have the resources or authority of the SEC.
The fact that the CFTC was tasked with overseeing the vast US derivatives market in the wake of the 2008 financial crisis Already mentioned by supporters As the “Achilles heel” of Dodd-Frank financial reform.
In November 2021, FTX started a full-court press and selected preferred regulators. Hire Former CFTC Commissioner Mark Wetchen As the person in charge of “policy and regulation”. FTX General Counsel Miller said: former lawyer for CFTC.
In the same April podcast, Bankman-Fried discussed pushing for clarity on crypto regulation, suggesting that crypto tokens traded on his platform are effectively a Ponzi scheme.
he Said Host Joe Weisenthal and Procrypt Bloomberg opinion Columnist Matt Levine wrote, “I [most] Bullishness on cryptocurrency pricing is just an inaccessible amount today. Bankman-Fried was referring to the broader market of banks, mutual his funds and pension funds, known as institutional investors, who are reluctant to invest in cryptocurrencies on a large scale, likely due to regulatory concerns. I’ve been The world’s largest pension fund $23.6 trillion assets, mutual funds $27 trillion in assets.
Bankman-Fried reflected on his desired policy outcomes, stating: . . that’s roughly where the money gets locked up. “
The following month, the House Agriculture Committee — which retains jurisdiction over the CFTC, thanks to the historical quirkiness of its origins — held a hearing. controversial proposal Starts with FTX make borrowed money available to investors For a new form of 24/7 crypto trading.
The plan to exclude brokers and other third parties from the trading process has been denounced by Georgia Democrat David Scott, chairman of the House Agriculture Committee, calling it a “serious threat” to global derivatives markets. Stated.
But it garnered unspoken admiration from members like Sean Patrick Maloney, chairman of the Democratic Congressional Committee, a New York Democrat. funny idea. You sure got everyone excited, and they hate it. “
bankman fried Donate $5,800 in person Maloney in this cycle. Maloney, September Introduced a more customized version of the Gillibrand invoice Hand over crypto regulatory authority to the CFTC.
The fate of these bills is currently unknown. Both SEC and CFTC published research On FTX this week. The authorities could have launched an investigation into FTX’s liquidity sooner, but they were unable to do so.
It is unclear when FTX customers will be able to recover their assets.
Friday night, FTX announced It means it’s been hacked. The company wrote: “FTX apps are malware. Remove them. Chat is open. Do not visit FTX sites as they may download Trojans.”