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Claw-back Risk: 1 in 3 Members of Congress Received ‘Cash Donation’ from FTX/SBF

Coindesk | Jesse Hamilton, Cheyenne Ligon, Elizabeth Napolitano | Jan 17, 2023

Response by Congress what will they do with FTX donations 1 - Claw-back Risk:  1 in 3 Members of Congress Received 'Cash Donation' from FTX/SBF

More than one in three of the 535 senators and representatives in the U.S. Congress showed up to the new session with FTX baggage, having received campaign support from one of the senior executives of the fraud-ridden crypto giant.

  • CoinDesk has identified 196 members of the new Congress who took cash from Sam Bankman-Fried or other senior executives at FTX, a crypto exchange that filed for bankruptcy in Delaware in November after CoinDesk revealed unusually close ties between FTX and Alameda Research, an affiliated hedge fund. The names in Congress range from the heights of both chambers, including new Speaker of the House Kevin McCarthy (R-Calif.) and Senate Majority Leader Chuck Schumer (D-N.Y.), down to a list of recipients new to high-level politics.

See:  FTX Recovered $5 Billion to Payback Creditors Estimated at $8 Billion

  • After the lawmakers received the money, it became clear – according to the work of journalists, the criminal charges and admissions of guilt from FTX insiders – that the funds sprang from this colossal financial swindle. CoinDesk reached out to all 196 lawmakers to ask what they would do with the money.
    • Of the 53 campaigns that responded on the record, 64% decided to forward the donated amounts to nonprofit causes.  However, the campaigns channeling tainted money to favored charities may not escape the reach of FTX’s bankruptcy case. And even the organizations they give to could be roped in.
    • Clawbacks are coming: If, during FTX’s bankruptcy process, the money its executives gave to campaigns (as well as other causes) is deemed “fraudulent conveyances,” the recipients have to give it back to FTX’s estate.
  • Several campaign managers who spoke to CoinDesk expressed frustration with the situation, saying they don’t know how to give the funds back.
    • Matt Lusty, a campaign adviser for Sen. Mike Lee (R-Utah), who received money from Ryan Salame, the co-CEO of FTX Digital Markets, told CoinDesk the campaign was “looking for an appropriate place to make a donation in that amount.  There is nowhere to return the donation since his assets have been seized."
    • Some of Congress’ most crypto-friendly members, including Rep. Tom Emmer (R-Minn.), who received $8,700 from Salame and Zach Dexter (the CEO of FTX US subsidiary LedgerX), have kept mum on the subject.

See:  BIS Publishes Report on Options to Address Crypto Risks: Ban, Contain, Regulate, Or?

  • All of the direct donations that politicians are scrambling to cleanse from their campaigns came from the executives’ personal money, and so until a legal determination emerges that the funds really should be considered part of the company’s bankruptcy, Sabino, the St. John’s professor, said a clawback process “does not affect donations [Bankman-Fried] made with his own money.”

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