Greedy Politicians Can Never Resist A Free Lunch

The End Of Sam Bankman-Fried

3 hustlers who have persuaded themselves and, apparently, each other that they just want to do good

And here I thought I was the only one who hated slimy conservative Democrat and crypto-crook Sam Bankman-Fried. Turns out he has more enemies— or at least detractors— than you can count. This weekend, social media was rife with stories about SBF’s involvement with sex orgies, drug addiction, murder and even the Russian war against Ukraine! He appears to have a chapter of QAnon devoted to him already! And, needless to say, there’s a big Elon Musk connection as well. He’s been online tweeting away, talking about how SBF set off his bullshit detector way back when.

I’ll get into all this stuff in a minute. But I just want to bring up something overtly political first. SBF made his big splash this cycle but putting over $10 million dollars into the failed congressional campaign of some random guy in Oregon, Carrick Flynn. It was part of the concerted effort by crypto-crooks to buy influence in Congress, leaning heavily on both grotesquely corrupt conservatives like Thom Tillis (R-NC) and grotesquely corrupt “liberals” like Ritchie Torres (D-NY). The $13 million SBF spent in the race garnered his candidate 11,105 votes (18.3%) in the primary. Bankman-Fried also spent $935,704 smearing Andrea Salinas, the candidate who won the primary.

The district, OR-06, is one of the 5 pivotal races that will determine which party will control the House. The race hasn’t been called yet and right now, with 80% of the votes counted, Salinas is leading Republican Mike Erickson 118,246 (49.7%) to 114,188 (48.0%). No doubt she would have done better had a million dollars with of negative ads not been launched against her by a dilettante crypto-billionaire living in the Bahamas. To kiss SBF’s ass, the Pelosi's SuperPAC also threw a million dollars into the race to help the random guy.

OK, let’s start with a memo between Musk and Michael Grimes, a Managing Director and Head of Global Technology investment banking at Morgan Stanley:

…followed by Elon’s bullshit detector

According to completely fake and unreliable sources that get their talking points from Moscow, Bannon and Tucker and spread their narratives across right-wing social media, Ukraine was “investing” U.S. military aid money in FTX, but that sounds like a stretch to me— something being floated by the Russo-Republicans to embarrass Hunter Biden if the Republicans wind up winning the House majority after all.

This is an endless loop of looniness of course but let’s not leave out the pedophiles and murders and Mossad

The Lever published a crypto-politics piece on Friday as Bankman-Fried’s empire was disappearing, Andrew Perez and his team wrote that “In April, when cryptocurrency guru and Democratic mega-donor Sam Bankman-Fried described how crypto tokens work on a Bloomberg podcast, the host remarked that it sounded a lot like being ‘in the Ponzi business.’ Bankman-Fried, founder of the FTX cryptocurrency exchange, replied that this was ‘a pretty reasonable response’ with a ‘depressing amount of validity.’ The conversation— which occurred days after one of the industry’s top regulators in Washington tweeted a picture with Bankman-Fried— probably should have set off blaring alarm bells throughout Washington, D.C., and the financial industry. It didn’t. On Friday, FTX, which previously had $16 billion in customer assets, and was valued at $32 billion in its most recent investor funding round in September, filed for bankruptcy in Delaware. Bankman-Fried, 30, resigned as its CEO. The collapse underscores how the $849-billion crypto industry— down by one fifth in the last week and from a high of $3 trillion a year ago— has been protected by regulators who are asleep at the wheel, while hapless ordinary investors, suckered in with slick ads from prominent celebrities and athletes, lose their savings. A few days after Bankman-Fried’s prescient comments on the Bloomberg podcast, FTX co-hosted a crypto confab in the Bahamas with world leaders, celebrities, and investors. On stage, Bankman-Fried interviewed former President Bill Clinton and former British Prime Minister Tony Blair while wearing a T-shirt, shorts, and New Balance sneakers. According to an industry publication, Clinton suggested that regulators should adopt a ‘do no harm’ mentality when dealing with cryptocurrencies. Politico announced that the event heralded the crypto industry’s ‘strange new respectability.’”

At the time, Bankman-Fried was fashioning himself as a political kingmaker, boosting crypto-friendly candidates in a series of Democratic congressional primaries, and getting advice from veteran Democratic consultants and younger, quasi-left upstarts. In May, Bankman-Fried told NBC News he aimed to spend up to $1 billion on the 2024 elections.

Now, just six months later, FTX has fully collapsed. According to the Wall Street Journal, FTX had “lent billions of dollars worth of customer assets to fund risky bets by its affiliated trading firm, Alameda Research, setting the stage for the exchange’s implosion.”

…Lawmakers on Capitol Hill are now raising the prospect of a new regulatory push around crypto, though larger questions still remain: How have regulators allowed the crypto industry to operate with so little scrutiny for so long? Why did the political and consulting class accept and even court Bankman-Fried’s intrusion into Democratic Party politics, even after he effectively admitted the scam?

…This year, Bankman-Fried spent millions trying to decide Democratic congressional primaries and donated thousands to Democratic lawmakers overseeing the crypto industry.

Worst of the non-Republican crooks in this scheme are 4 fake-progressives: Hakeem Jeffries, Shontel Brown, Ritchie Torres and the congressman-elect (and Torres puppet) who SBF just bought an Orlando congressional seat for, Maxwell Alejandro Frost.

As Bankman-Fried attempted to flex his muscles in the electoral arena, he also became a regular presence on Capitol Hill, ostensibly helping lead the charge for regulation of his nascent industry.

Bankman-Fried and FTX helped launch a crypto lobbying group called the Association for Digital Asset Market (ADAM), which pushed to kneecap the aggressive new leadership of the Securities and Exchange Commission. Using a bill pushed by Sen. Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY), ADAM instead tried to position the far-smaller and more poorly-funded Commodities Futures Trading Commission (CFTC) as its exclusive regulator.

Lummis previously touted a statement from ADAM on her website promoting the legislation. That webpage has since been deleted. ADAM’s own website used to list FTX general counsel Ryne Miller as part of the organization’s board of directors; his name has now been removed.

Bankman-Fried combined his behind-the-scenes lobbying— both through ADAM and his own firm, which has spent $670,000 lobbying this year— with a public-facing critique about how crypto really needs to be regulated.

“[The U.S. should] be able to strike a balance between fostering economic growth and providing consumer protection and protecting against systemic risk and financial crimes,” Bankman-Fried said in a February interview with the Economic Club of New York.

Bankman-Fried’s remarks to New York’s elites came as SEC Chairman Gary Gensler began taking a tougher posture towards crypto. Gensler warned last year that most trading platforms would need to register with the agency, and that the SEC was nearly doubling the size of its special unit policing crypto.

As such, the industry began seeking to shunt regulatory supervision to the CFTC. A relatively marginal agency originally tasked with overseeing agricultural futures contracts, the CFTC has neither the resources nor the mandate of the SEC.

The fact that the CFTC was handed oversight, in the wake of the 2008 financial crisis, of the sprawling U.S. derivatives market is already referred to by advocates as the “Achilles heel” of Dodd-Frank financial reform.

In November 2021, FTX kicked off a full-court press to pick its preferred regulator by hiring former CFTC commissioner Mark Wetjen as its head of “policy and regulation.” FTX’s general counsel, Miller, is a former attorney for the CFTC.

Bankman-Fried discussed his push for crypto regulatory clarity in the same April podcast where he suggested that the crypto tokens traded on his platform are effectively a Ponzi scheme.

He told host Joe Weisenthal and pro-crypto Bloomberg Opinion columnist Matt Levine that “the thing that makes me the [most] bullish about crypto asset pricing is just the amount of money that isn’t able to access it today.” Bankman-Fried was referring to the broad market of banks, mutual funds, and pension funds known as institutional investors that have resisted major investments in crypto, likely due to regulatory concerns. The world’s largest pension funds have $23.6 trillion in assets, and mutual funds have $27 trillion in assets.

Reflecting on his desired policy outcomes, Bankman-Fried said, “We need to know what regulatory framework we are a part of, what licenses are necessary to play different roles in this space… that’s roughly where the money gets trapped.”

The following month, the House Agriculture Committee— which retains jurisdiction over the CFTC, thanks to the historical quirk of its origins— held a hearing on a controversial proposal from FTX to begin allowing investors to use borrowed money for a new form of round-the-clock crypto trading.

The plan, which would have cut brokers and other third-parties out of the trading process, drew condemnation from House Agriculture Committee Chair David Scott (D-GA), who called it “a serious threat” to global derivatives markets.

But it drew tacit praise from members like Democratic Congressional Committee Chair Sean Patrick Maloney (D-NY), who gushed, “I have to tell you, Mr. Bankman-Fried, I am fascinated by this, and I think this is a really interesting idea. You sure got everybody stirred up, and they hate it. They hate this idea.”

Bankman-Fried personally donated $5,800 to Maloney this cycle. In September, Maloney introduced a more tailored version of Gillibrand’s bill to hand regulatory authority of crypto over to the CFTC.

…It is unclear when, if ever, FTX customers will be able to recover any of their assets.

Bankman-Fried tweeted on Friday that he is “going to work on giving clarity on where things are in terms of user recovery ASAP.”

Late Friday, FTX announced that it had been hacked. The company wrote: “FTX apps are malware. Delete them. Chat is open. Don't go on FTX site as it might download Trojans.”

The politicians who acted as SBF Trojan horses haven’t had much to say about any of the recent developments but no doubt, Sean Patrick Maloney has crossed FTX off his list of likely next employers. Something tells me the erstwhile kingmaker and crypto-billionaire will be spending some time in prison starting pretty soon-- probably a lot sooner than Trump.