The overnight collapse of cryptocurrency exchange FTX has caused untold bewilderment in the crypto space and in the business community, which is still trying to figure out how a company, valued at $32 billion in February, crumbled in a matter of days.
U.S. Regulators -- the Department of Justice, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC)-- have opened investigations, as have authorities in the Bahamas, where FTX founder Sam Bankman-Fried lived and where the cryptocurrency exchange was based.
Since Bankman-Fried's crypto empire filed for Chapter 11 bankruptcy on Nov. 11, the dealings of the fallen king of crypto with politicians have come under scrutiny. Bankman-Fried had become the institutional face of crypto, spending most of his time in Washington, where he tried to influence the direction of the young industry’s regulation.
He consequently contributed millions of dollars to elected Democrats. Bankman-Fried emerged as major donor to Democratic candidates, leading up to the Nov. 8 midterm elections. His political action committee gave over $23 million to the Democratic Party while the 30-year old founder of the now-insolvent crypto brokerage FTX, gave $13 million of his own money to both the Democrats and Republicans, according to filings with the Federal Election Commission (FEC).
Big Donations to Republicans Too
But on Oct. 27, 12 days before the midterm elections, FTX US, the American subsidiary of FTX, donated $1 million to the Senate Leadership Fund Super-PAC, according to a filing with the FEC.
The Super-PAC that is lined up with Senator Republican leader Mitch McConell said it "has one goal: to build a Republican Senate majority that will defend America from Chuck Schumer and Senate Democrats’ destructive far-left agenda."
The donation was made by West Realm Shires Services Inc, which is the trading name of FTX US.
FTX US also gave $750,000 to the Congressional Leadership Fund and $150,000 to the American Patriots PAC. The two PACs backed House Republican candidates.
It also donated $100,000 to the Alabama Conservatives Fund.
Ryan Salame, the co-CEO of FTX Digital Markets, one of FTX's affiliates, donated nearly $24 million to the Republican Party, the records show.
These donations were made amid growing calls for strict regulation of the crypto industry.
Since the FTX bankruptcy, most politicians have tried to distance themselves from Bankman-Fried, for fear of being tarnished by scandal. Any association with him is now considered toxic.
Senators Elizabeth Warren and Dick Durbin, both Democrats, are requesting documentation from the founder of the bankrupt company, to shed more light into the collapse of the company.
The lawmakers call for a "complete and transparent accounting” of the business dealings of FTX and its hedge fund, Alameda Research.
An Approaching Deadline
"New revelations continue to shed light on what now appears to be an appalling case of greed and deception,” Warren and Durbin wrote in a letter to Bankman-Fried and FTX's new CEO John J. Ray III, who is overseeing its bankruptcy proceedings.
"Billions of dollars worth of investor funds seem to have disappeared into the ether,” Warren and Durbin wrote. “These massive losses raise questions about the behavior of” Bankman-Fried and the company's executives.
The senators said Bankman-Fried must turn in the documents by Nov. 28, which include "complete copies of all” the balance sheets of FTX and its subsidiaries from 2019 to 2022.
But the documentation that the Democrats want may not even exist.
"Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here," new CEO John Ray wrote in a 30-page document filed with the United States Bankruptcy Court for the District of Delaware that was made public on Nov. 17.
"From compromised systems integrity and faulty regulatory oversight abroad, to the concentration of control in the hands of a very small group of inexperienced, unsophisticated and potentially compromised individuals, this situation is unprecedented."