Daily Management Review

Risk Of Drying Up Of Crypto Political Funding In The US After FTX Collapse


Risk Of Drying Up Of Crypto Political Funding In The US After FTX Collapse
Sam Bankman-Fried (SBF), the founder of the collapsed crypto exchange FTX, was a major political donor in the United States. His once deep pockets primarily supported Democratic candidates and campaigns, but that may be changing now.
The landscape of pro-crypto candidate funding in the United States may be changing without its largest donor.
During the 2021/2022 US election cycle, SBF and FTX executives donated more than $70 million to political campaigns. According to Open Secrets, SBF alone spent nearly $40 million.
According to a Financial Times report published on November 13, without this flow of funds, pro-crypto Democratic candidates may be cut off. The collapse of SBF's crypto business empire is likely to have a negative impact on the crypto funding scene.
In terms of Democrat political funding, SBF was second only to billionaire George Soros. He came in sixth place overall. Republicans were favored by the second through fifth-largest donors.
He stated earlier this year that he would spend up to $1 billion to influence presidential election campaigns in 2024, but he has since backtracked.
SBF also supports the political action committee Protect Our Future (PAC). Since its inception in January 2022, the organization has spent more than $27 million on Democrat candidate support. During the current election cycle, the PAC endorsed 25 Democrats in congressional races. Furthermore, 18 of them have won their respective races, according to the report.
As a result, SBF became one of the most visible crypto advocates in Washington, advocating for regulations and legislation.
Nonetheless, many lobbyists and donors suspected that SBF's contributions were motivated by self-interest.
SBF has donated to the rightwing PACS Alabama Conservatives Fund and Heartland Resurgence during this cycle. Senators John Boozman and Debbie Stabenow have stated that they will continue to support the Digital Commodities Consumer Protection Act, which SBF advocated for.
FTX also supported the GMI PAC, which contributed $5.8 million to the web3 Forward PAC, a pro-crypto committee.
According to the Financial Times, there is growing concern about clawbacks if US financial regulators intervene. The SEC has moved quickly to investigate FTX's lending activities and management of customer funds.
Legal experts argued that even if the funds were linked to ill-gotten gains, clawbacks would be illegal.
However, a major regulatory crackdown in the United States is very likely. As a result, cryptocurrency exchanges may be treated similarly to banks. Users would be subject to all of the restrictions and monitoring that come with having a bank account.
According to some industry experts, the lack of clarity in America drove traders to an unregulated offshore exchange.