The Washington PostDemocracy Dies in Darkness

Opinion The crypto dollars in politics flowed to Republicans, too

The FTX app on a smartphone in Barcelona on Nov. 15. (Angel Garcia/Bloomberg News)

Jim Geraghty is the senior political correspondent of National Review.

Crypto wunderkind Sam Bankman-Fried deserves all the grief he’s getting, and it is good to see lawmakers symbolically returning donations from FTX executives by donating equivalent amounts to charity. Bankman-Fried was among the biggest donors to Democrats this past election cycle, distributing more than $40 million through direct contributions and super PACs.

But Bankman-Fried said he gave to more than Democrats. He said in an interview released Tuesday on YouTube that he donated “about the same amount of money” to Republicans. That $40 million went unnoticed because all his Republican donations were “dark money,” he said.

And there’s another key figure at FTX, executive Ryan Salame, who gave roughly $24 million to Republicans this past cycle and who has, so far, largely avoided being a face of the FTX debacle.

The comparably buttoned-down and clean-cut Salame wasn’t a larger-than-life character, appearing on magazine covers and getting compared to Warren Buffett. Yet, as Rep. Brad Sherman (D-Calif.) contended, “when you examine FTX efforts to influence Washington, you have to look at both CEOs, not just the eccentric guy wearing the shorts.”

The loudest partisan arguments about the power of Big Tech in American culture have largely ignored cryptocurrency firms. Few people in Washington felt as though they instinctively understood crypto — the very prefix means “hidden” or “secret” — and Bankman-Fried, the disheveled 30-year-old MIT grad, seemed like manna from heaven for Democrats, while Salame was the deep-pocketed donor of GOP dreams.

Bankman-Fried and Salame were essentially two giant piles of money oozing around Washington, asking who wanted to be friends. And all of Washington’s instinctive suspicions about Silicon Valley, “tech bros” and corporate greed withered away. In March, eight members of Congress — Republicans Ted Budd (N.C.), Warren Davidson (Ohio), Byron Donalds (Fla.) and Tom Emmer (Minn.), and Democrats Jake Auchincloss (Mass.), Josh Gottheimer (N.J.), Darren Soto (Fla.) and Ritchie Torres (N.Y.) — wrote a letter to the Securities and Exchange Commission, complaining that the agency’s requests for information from cryptocurrency companies “might be at odds with the Paperwork Reduction Act.” Emmer said the requests were “overburdensome” and “stifling innovation.”

Oops. Maybe the SEC had good reason to dig deeper into the financial data of cryptocurrency firms.

At this point, we don’t know what Salame knew about the real numbers at FTX. Unnamed figures close to Salame told the Wall Street Journal that he said he vomited when he learned that FTX was missing billions of dollars. Those same unnamed figures claimed Salame “wasn’t part of the inner circle around FTX’s leader.”

Maybe that’s spin. But there is evidence that Bankman-Fried really did keep the truth about FTX’s finances exceptionally close to the vest. Bankman-Fried secretly moved $10 billion of customer funds from FTX to trading company Alameda Research, according to Reuters, with apparently $1 billion to $2 billion now missing. He reportedly used a “backdoor” in FTX’s bookkeeping system, which allowed him to move funds in ways that would not alert other people, including external auditors.

John J. Ray III, the veteran of the unwinding of what was left of Enron, is playing a similar cleanup role at FTX. In a bankruptcy filing full of unusual and colorful details, Ray indicated some senior executives at FTX were kept in the dark about the company’s mounting problems. “I believe some of the people most hurt by these events are current and former employees and executives, whose personal investments and reputations have suffered,” Ray wrote.

At the same time, in the bankruptcy filing, Alameda Research listed a loan to Salame of $55 million as outstanding. That looks like pocket change compared with Alameda’s $1 billion loan to Bankman-Fried, but it still raises the question of why a hedge fund was popping out 10-figure and eight-figure loans to its top executives like a Pez dispenser.

There’s also the curious wrinkle of Salame’s relationship with Michelle Bond, a GOP congressional candidate who lost in the primary in New York’s 1st District this year. Bond received $400,000 in consulting fees from FTX Digital Markets, a sum roughly comparable to her salary with the Association for Digital Asset Markets, an industry group. In the grand collapse of FTX, some six-figure fees to a top executive’s girlfriend might seem like small potatoes, but it might offer one more example of large sums of money going out the door based upon connections, with little scrutiny or accountability.

Ray’s blistering assessment of the overall culture of FTX doesn’t leave a lot of room to exempt or endorse Salame’s management. Best-case scenario, Salame was asleep at the switch, atop a corporate culture that sounds like something out of “Animal House,” while his colleague took out massive loans and secretly moved clients’ money to cover other debts.

A lot of Washingtonians like to think of themselves as tough, cunning, keen students of human behavior who have seen it all, and who aren’t easily fooled. But their experience with FTX indicates that many D.C. movers and shakers will believe in Santa Claus if he fits their preconceived notions and promises to deliver what they have always wanted. The nation’s capital is much more naive than it is willing to admit.