The Crypto Scandal Is Also an Opportunity for the Left

The Crypto Scandal Is Also an Opportunity for the Left

The Crypto Scandal Is Also an Opportunity for the Left

Sam Bankman-Fried’s downfall can help fuel a new war on plutocratic donors.


Sam Bankman-Fried’s empire of fraud was protected by the disguise of philanthropy, with the ideology of effective altruism used as justification for his once-immense fortune, estimated recently, at its peak, at over $26 billion. That fortune, always largely imaginary and speculative, is now gone. The Bahamas-based crypto exchange Bankman-Fried founded, FTX, is bankrupt. Bankman-Fried himself is facing a variety of criminal charges on fraud in both the Bahamas and the United States. Bankman-Fried’s philanthropy was always a shifty business (despite having prominent neoliberal apologists), since it was so clearly a vehicle for keeping cryptocurrency deregulated.

Yet it could be that Sam Bankman-Fried turns out to be a philanthropist after all. While facing jail time for his business activities, he’s inadvertently focussed a powerful searchlight on the sleazy world of the donor class. Bankman-Fried was the second-largest donor to the Democratic Party in the 2022 election cycle, donating in excess of $40 million. Like many businesses, FTX tried to spread donations to both major political parties in order to maximize access and influence. Another former FTX executive, Ryan Salame, was gaining a reputation as a “budding Republican megadonor” after lavishing $13.4 million on the GOP this year.

Last month, I wrote that the Democrats have a crypto problem. The exact shape of that problem is about to become much clearer as law enforcement starts to talk to the political figures who took FTX’s allegedly ill-gotten loot. On Saturday, The New York Times reported that “a law firm representing some of the most important Democratic political organizations—including the party’s official campaign arms, its biggest super PACs and the campaigns of high-profile politicians such as Representative Hakeem Jeffries—received an email from a prosecutor in the United States attorney’s office for the Southern District of New York. The email sought information about donations from Mr. Bankman-Fried, his colleagues and companies.”

The law firm is Elias Law Group, which was formed in 2021 by Democratic party bigwig Marc E. Elias. According to the Times, “political groups represented by Mr. Elias’s firm that received funding from FTX executives include the Democratic National Committee, which received hundreds of thousands of dollars from Mr. Bankman-Fried; the Democratic Congressional Campaign Committee, which received $250,000 from him; and the Democratic Senatorial Campaign Committee, which received more than $100,000” from Bankman-Fried and one of his FTX associates, Nishad Singh.

To be clear, none of the politicians who took money from Bankman-Fried and other FTX executives have been accused of crimes. But at a minimum they exercised bad judgment in taking money from a dubious source. And if Bankman-Fried is found guilty of fraud, there could be enormous social pressure to repay the donations in order to partially reimburse his victims—notably FTX shareholders. Both the DNC and the DSCC have issued statements saying they are setting aside money to return to any victims after a legal determination is settled.

The pressure to return money will be all the stronger because Bankman-Fried might be guilty not just of running a Ponzi scheme but also of violating campaign finance law. The Times reports, “Other people who worked with FTX executives had privately expressed concern in an encrypted group chat, images of which were reviewed by The New York Times, about whether donations from Mr. Bankman-Fried and Mr. Singh were made in compliance with campaign finance rules.”

If Bankman-Fried broke campaign finance laws, then the whole issue of big money in politics will once again come to the fore. In 2016, Bernie Sanders was able to get enormous traction in his run to be the Democratic Party’s presidential nominee by highlighting the role of wealthy donors and by insisting that his campaign be funded solely by small donations. Since then, other progressives, notably Representative Alexandria Ocasio-Cortez, have followed the Sanders model in using small-donor funding. But the Democratic Party establishment has staged a partial counterrevolution by mobilizing big donors to swat down progressive candidates in primaries.

It’s important to realize that the Bankman-Fried story is not just about fraud in the cryptocurrency world. It’s also about internecine conflict in the Democratic Party. Bankman-Fried’s role in the Democratic Party ecosystem was as a financier of the counterrevolution against the progressive insurgency. To be sure, Bankman-Fried occasionally funded progressive candidates—such as newly elected Florida Representative Maxwell Frost—as part of the general donor strategy of spreading wealth around to ensure maximum access. But Bankman-Fried’s donations were overwhelmingly geared toward defanging the left wing of the party.

Alex Kane, writing in Jewish Currents, detailed one example of how Bankman-Fried’s spending worked in a North Carolina congressional primary, where progressive candidate Nida Allam lost to Valerie Foushee:

From March to May, the United Democracy Project, AIPAC’s Super PAC, spent over $2 million on mailers and advertisements in support of Valerie Foushee, Allam’s main opponent in the Democratic primary. Such groups are allowed to spend unlimited sums of money for or against a candidate but are barred from coordinating with candidates themselves. AIPAC’s political action committee (PAC) bundled another $460,000 from individual contributors for Foushee’s campaign, constituting about 39% of Foushee’s total fundraising. Foushee also benefited from about $1 million in spending by Protect Our Future, a Super PAC bankrolled by Sam Bankman-Fried—the 30-year-old crypto tycoon and philanthropist whose multibillion-dollar fortune vaporized last week amid a still-unfolding scandal—and another $290,000 from the AIPAC-tied group Democratic Majority for Israel, among other groups.

As Kane’s reporting makes clear, Bankman-Fried isn’t the only donor funding the counterrevolution against left-wing primary candidates. AIPAC as an umbrella organization is leading the charge. But Bankman-Fried was a significant part of this project.

Over the next month—and possibly years—Bankman-Fried’s criminal case will dominate headlines. This presents a problem for establishment Democrats—but also an opportunity for the left. There are many lessons to be drawn from Bankman-Fried’s sordid rise and fall, his ability to quickly gain clout in politics, and his eagerness to join a political project designed to drown out small-donor funding of progressive candidates. Bankman-Fried should be made the poster boy of how the donor class corrupts politics. The left can then leverage his downfall to challenge the establishment that was so eager to work with the now-discredited plutocrat.

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