Federal prosecutors in Manhattan have reached out to recipients of political contributions from Sam Bankman-Fried, former head of the FTX crypto exchange that imploded in bankruptcy and lost billions of dollars of client investments, The New York Times reported Saturday.
Investigators are also looking into political donations from two former FTX executives, according to the Times.
Prosecutors have contacted representatives for campaigns and committees that received millions of dollars from Bankman-Fried, his colleagues and their companies after the former CEO was arrested in the Bahamas on Monday, people familiar with the request told the Times.
Prosecutors are also investigating donations to Republican campaigns and committees by another FTX executive who was a top financier on the right, a source told the newspaper.
Bankman-Fried reportedly donated nearly $45 million, primarily to Democratic campaigns and committees, before the 2020 election.
The three major Democratic campaign groups — the Democratic National Committee, Democratic Senatorial Campaign Committee and Democratic Congressional Campaign Committee — said Friday they would set aside more than $2 million they received from Bankman-Fried and eventually seek to return the money to FTX’s customers, The Washington Post reported.
There’s no indication of any wrongdoing by the political parties, campaigns or committees, the Times noted. But prosecutors have argued that Bankman-Fried helped himself to FTX client money for the donations. In such a case, clients could seek to recover that money from political organizations or campaigns.
The FTX implosion is one of the biggest corporate scandals in years.
Prosecutors have accused Bankman-Fried and others of simply helping themselves to customer money to buy expensive Bahamian real estate, invest in other firms, pay for personal luxuries — and make political contributions in a bid to block regulations of the industry they were exploiting.
Bankman-Fried has denied any wrongdoing and said he was simply careless, distracted and overwhelmed by the business.
The new CEO of the collapsed crypto exchange, John Ray III, testified before a House committee earlier this week that Bankman-Fried and other executives relied on “old-fashioned embezzlement” to line their pockets.
Ray, who took over management of Enron after that company’s massive bankruptcy, said FTX was wiped out by an “unprecedented and complete failure of corporate controls.”
“Never in my [40-year] career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here,” he wrote in a filing with the Delaware bankruptcy court.
Bankman-Fried has been charged with wire fraud, money laundering and securities fraud related to his management of FTX and Alameda Research, another company he co-founded.
He is also accused of conspiring to violate campaign finance laws that prohibit corporate donations to campaigns in other people’s names.