FTX Wants Politicians and PACs to Return Their Donations

https://techcrunch.com/2023/02/06/ftx-wants-politicians-and-pacs-to-return-their-donations/

FTX and its affiliated debtors have sent confidential letters asking politicians, PACs and other recipients of funds to return donations made by the crypto exchange once valued at $32 billion.

The recipients are being asked to return donations — or potentially face repercussions — to the now-bankrupt exchange, according to a Sunday statement from FTX.

The group, self-dubbed “FTX Debtors,” did not disclose which parties were involved, but said letters were sent to recipients that received payments from FTX debtors or the exchange’s former CEO, Sam Bankman-Fried, among others.

The statement requested funds to be returned by February 28 and shared a “special email account” for recipients to return funds to. Even if the recipient used the funds to make payments or donations to third parties — including charities — it doesn’t prevent them from having to return it, according to the statement.

This announcement follows public requests from FTX in late December for recipients to return funds voluntarily.

“To the extent such payments are not returned voluntarily, the 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,” it said in the statement.

In mid-January, FTX debtors identified $1.7 billion of cash and $3.5 billion of crypto assets and $3 million of securities, according to a company statement. This totals about $5.5 billion in liquid assets, which FTX’s new CEO, John Jay Ray III, referred to as a “herculean” effort to assess the firm’s financial position.

In the past, Ray, who took over after the exchange filed for Chapter 11 bankruptcy, has previously stated that donations from FTX should be recovered. Ray has also said there’s a possibility for the exchange to restart and that “everything is on the table.”

A public spreadsheet by OpenSecrets, a nonprofit monitoring money in politics, tracked over $84 million in donations to political candidates and organizations between Bankman-Fried, former FTX co-CEO Ryan Salame and FTX’s former engineering head, Nishad Singh.

Before the exchange’s demise, Bankman-Fried was well known for his support of the U.S. Democratic Party and was one of the largest donors in the runup to the 2020 presidential election and the 2022 midterms.

The biggest single recipient was Protect Our Future, a PAC that aims to “help elect candidates who will be champions for pandemic prevention.” The group got $28 million from Bankman-Fried, according to OpenSecret.

He also contributed donations to Democratic Senators Debbie Stabenow, Kirsten Gillibrand, Maggie Hassan and Cory Booker, as well as Republican Senators John Boozman, Lisa Murkowski and Susan Collins.

The majority of Bankman-Fried’s donations were traced to Democrats, but he also claimed in an interview with reporter Tiffany Fong that he donated “about the same amount” to the Republican Party as well. “That was not generally known,” he added.

“All my Republication donations were dark,” Bankman-Fried said in the interview two months ago, explaining that the donations were not publicly disclosed through official filings. “The reason was not for regulatory reasons, it was because reporters freak the fuck out if you donate to Republicans. They’re all super liberal and I didn’t want to have that fight.”

As the deadline to return funds is just weeks away, candidates and political groups may surface in response to the request. Whether those donations are returned has yet to be determined, and this may be just one step in a prolonged, lengthy legal case for FTX to claw back funds.