Democrats should rid themselves of Sam Bankman-Fried’s dirty money

Disgraced crypto wunderkind Sam Bankman-Fried implied earlier this year that he might spend as much as $1 billion on political donations before 2024. Now, would-have-been recipients are probably relieved he didn’t.

The collapse of cryptocurrency exchange FTX has resulted in catastrophic financial losses for its executives, its employees and its investors alike. The fact that the implosion has raised questions of alleged fraud also puts into an awkward position the numerous campaigns and political action committees that received donations from the onetime multibillionaire, widely known as SBF, who owned it: What should they do with this potentially ill-gotten cash? There’s no right answer, but there is a wrong one. Federal legislators, almost all of whom will likely be involved in regulating the crypto industry in general or investigating FTX specifically, can’t keep it.

Mr. Bankman-Fried personally gave more than $13 million to candidates and organizations of both parties in just this past midterm election cycle, and his PAC devoted more than $23 million to propping up the Democratic Party. His right-hand man, Ryan Salame, did much the same for the GOP; the party received almost $24 million from him, more than $12 million from his PAC.

The trouble isn’t merely that the sources of these generous gifts are now disgraced. It isn’t even just that the beneficiaries of these generous gifts will have a glaring conflict of interest when it comes to addressing the FTX scandal, though that’s true. The problem is also that it is unclear where the money came from. Mr. Bankman-Fried may have “earned” it from running FTX or Alameda Research, his trading firm to which FTX appears to have lent customer funds. It turns out these ventures appear not to have been separate and solvent entities, and now users are unable to withdraw their funds from FTX – while lawmakers have, or had, plenty in their pockets thanks to the same businesses. It’s not just the integrity of the legislators that’s in question; it’s the integrity of the cash itself.

A handful of members of Congress from both parties – seven out of close to 100 queried by Popular Information – have said they’re relinquishing the money. Many, many more have remained silent. Some have mulled sending the money to whence it came, but that risks contributing to FTX’s legal defense. Some, such as Sen. John Hoeven (R-N.D.) intend to turn it over to whatever client reimbursement fund is set up during bankruptcy proceedings. That’s probably the cleanest answer to the question. But others are more poetic. A few legislators are sending to charity these donations from an entrepreneur who claimed to be devoted to a radical kind of altruism. The cause chosen by Rep. Jesús “Chuy” Garcia (D-Ill.)? “Financial literacy.”