Democrats Scramble As FTX Asks For Political Donations Back Under Legal Threat

In the wake of its spectacular collapse amid an international criminal investigation, the disgraced cryptocurrency exchange FTX has formally requested that political candidates and political action committees who received contributions from two senior company executives return the now-tainted cash, or face possible court action.

The company, under new leadership, and its debtors have sent notice to those who received contributions from former CEO Sam Bankman-Fried and former Digital Markets Co-CEO Ryan Salame, as well as other company officials, requesting the funds be voluntarily returned by Feb. 28 – or they may seek a refund in court.

The request comes as Bankman-Fried and other company executive faces numerous charges of fraud and money laundering.

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“FTX Debtors reserve the right to commence actions before the Bankruptcy Court to require the return of such payments, with interest accruing from the date any action is commenced,” the company announced in a statement, adding “recipients are cautioned that making a payment or donation to a third party (including a charity) in the amount of any payment received from a FTX Contributor does not prevent the FTX Debtors from seeking recovery from the recipient or any subsequent transferee.”

In all Bankman-Fried, Salame and other FTX figures funneled over $70 million to U.S. political candidates and causes in the 18 months ahead of the 2022 midterm elections.  Bankman-Fried gave $40 million to largely liberal causes, with Salame giving $23 million to mostly Republicans.

Bankman-Fried alone was the nation’s second-biggest donor to liberals in 2022, behind only George Soros, Yahoo News reports.

Political researchers “Unusual Whales” tracked and graphed the cash, showing the Democratic Senate Campaign Committee was the single-largest recipient of FTX cash.

They have also tracked donations to individual candidates, and whether the lawmakers plans to return the funds.

There is precedent for a court forcing candidates and political committees to return contributions in a bankruptcy proceeding.

As Bloomberg reports:

Campaign contributions have been clawed back by bankruptcy trustees before. In 2011, a district court judge ordered five party committees, including the Democratic National Committee and its Republican counterpart, to return donations totaling $1.6 million that they’d received between 2000 and 2008 from Allen Stanford, one of his top lieutenants and his Stanford Financial Group, which was part of a Ponzi scheme he operated until its collapse in 2009.

Though the party committees hadn’t known the money donated was part of the proceeds of a criminal fraud, they were ordered not only to refund the contributions but to also pay interest and the legal fees of the bankruptcy trustee. Dozens of campaign committees and political action committees that received smaller donations received letters requesting the money be returned. Of those, 43 disgorged donations totaling $162,250 while 39 held on to $117,700, according to a disclosure by the trustee.

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