FTX co-founder Sam Bankman-Fried was charged Tuesday in connection with what prosecutors said was a scheme to illegally funnel millions of dollars into politics ahead of the 2022 midterm elections, misappropriating customer funds in the process.
Bankman-Fried and unnamed co-conspirators made “tens of millions of dollars in illegal campaign contributions” to both Democratic and Republican candidates and campaign committees, Damian Williams, the U.S. attorney for Southern New York, said at a news conference unveiling the eight-count criminal indictment, which included a campaign finance violation charge.
The donations, Williams said, were “disguised” to look as though they were coming from wealthy donors when, in fact, the contributions were funded by Bankman-Fried’s privately held crypto hedge fund, Alameda Research, using stolen customer money.
“And all of this dirty money,” Williams said, was used to “buy bipartisan influence and impact the direction of public policy in Washington.”
Mark S. Cohen, Bankman-Fried’s attorney, said his client “is reviewing the charges with his legal team and considering all of his legal options.”
Bankman-Fried spent at least $70 million on 2022 campaigns, according to Federal Election Commission records — and three sources have told NBC News that there was much more in “dark money,” a term used to describe legal donations that do not have to be publicly disclosed — to engender goodwill with candidates on both sides of the aisle and to be in a position to peddle influence around the crypto industry no matter the outcome of the election.
Federal law limits donations from an individual to a single candidate to $5,800 — $2,900 for the general election and an equal amount for the primary.
Prosecutors alleged in the indictment Tuesday that Bankman-Fried deceived the FEC by making “contributions to candidates for federal office, joint fundraising committees and independent expenditure committees in the names of other persons” beginning in 2020 and continuing until last month.
The indictment alleges he also made illegal contributions through a corporation, which it does not name.
Prosecutors contended Tuesday that Bankman-Fried’s Alameda Research was the source of funds.
Bankman-Fried, 30, hosted conferences in the Bahamas that boasted visits from former politicians like Tony Blair and Bill Clinton, The Associated Press reported, as he built a reputation as a heavyweight campaign contributor — particularly among Democrats, whom he publicly courted in recent years.
Once believed to be a financial wunderkind, Bankman-Fried also faces a host of other charges. Prosecutors allege he committed wire fraud against customers and lenders and concocted conspiracies to commit money laundering and commodities and securities fraud, according to the indictment.
A separate civil complaint released Tuesday provided further details about how Bankman-Fried is alleged to have continued to expand a web of financial deceit to create a nearly limitless piggy bank that he used to buy luxury condos and real estate for himself, relatives and friends, as well as to donate millions to political campaigns.
He raised at least $1.8 billion for various FTX stock classes across numerous fundraising rounds, court documents show. About $1.1 billion was raised from just 90 U.S. investors.
Prosecutors allege in the civil complaint that Bankman-Fried improperly diverted huge sums to Alameda, which allowed him to use the money for his own purposes — even to provide himself loans.
However, he never disclosed the close relationship FTX had with Alameda to his investors, nor did he disclose Alameda’s “virtually unlimited ‘line of credit’ at FTX, its ability to carry a negative balance in its FTX customer account, and its exemption from FTX’s automated liquidation process,” according to the civil complaint.
Bankman was arrested in the Bahamas on Monday following his indictment by a federal grand jury in the Southern District of New York on Friday, Williams told reporters.
“This investigation is very much ongoing, and it is moving very quickly,” Williams said. “While this is our first public announcement, it will not be our last.”