The final verdict in Sam Bankman Freed's criminal fraud case was handed down last week, with the disgraced crypto tycoon receiving 25 years in prison and $11 billion in forfeiture.
This wasn't just the conclusion of one of the most high-profile corporate fraud trials of the past few years. It was also the final verdict against one of the most prominent campaign donors in the 2022 midterm elections. But if you think this signals the end of crypto’s influence on parliamentary elections, think again.
The political influence machines that Bankman Freed usurped continue to operate with new industry players. The masterminds of this election cycle are crypto exchange platforms Coinbase and Ripple. The infamous Winklevoss twins co-founded the cryptocurrency trading platform Gemini. and Andreessen Horowitz, a leading venture capital firm that funds crypto projects. They are picking up where Bankman Fried left off and trying to win favor with the political class.
A triumvirate of crypto PACs has come together: FairShake, Protect Progress, and Defend American Jobs. Together, they have raised about $80 million, a total that could reach or exceed the $100 million Bankman Fried has spent the most in a 2022 election.
All talk of causes related to pandemic prevention and effective altruism that accompanied the 2022 crypto shilling has completely disappeared. This is a one-sided story in which industry lobbies are using millions of dollars in donor cash to influence regulatory policy and chill enforcement of highly questionable financial products.
You might think Washington might be a little more coy about accepting these piles of cash. After all, the nation just witnessed one of America's most prolific campaign spenders being convicted of what essentially amounted to a dressed-up pyramid scheme. It's not just FTX. Lawsuits, criminal penalties, bankruptcies, and other cases of investor fraud have been rampant at numerous companies in the digital asset sector over the past two years. Binance, another major intermediary for crypto trading, paid $4.3 billion to US authorities this year for hosting a money laundering operation, one of the largest criminal penalties in history. Even Coinbase is actively involved in a major lawsuit with the Securities and Exchange Commission.
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“This industry is basically a lawless country with a 'if you can get it, get it' business model.” [with lawsuits], and before they can do that, buy off enough politicians to pass special legislation that has the face of regulation and the reality of deregulation,” said Dennis Kelleher, chief executive of financial reform nonprofit Better Markets. said the CEO. Kelleher said the cryptocurrency industry also doubled Lobbying spending has been slashed in the last year, and the company is on a hiring spree to hire former Congressional and government officials to build its legal team and win support in Washington.
Any optimism that politicians might vow not to use crypto money has been completely dashed. After all, there are more than enough desperate candidates eager to gain an edge over their opponents, trying to court the industry without shame or fear of backlash. Leaders of both parties also welcome donations.
In the 2022 midterm elections, Bankman Fried's influence machine will often marched He has aligned himself with pro-Israel groups and attacked progressives in a number of key races, such as Jamie McLeod-Skinner and Nida Allam in the Democratic primaries for House seats in Oregon and North Carolina. There is. Mr. Bankman Fried also significantly reduced checks to the Israeli Democratic Majority.
Although less pronounced this year, the same pattern seems to be at play. Andreessen Horowitz donated $250,000 to the United Democracy Project, a super PAC affiliated with the American Israel Public Affairs Committee. But in reality, the bond is even deeper.
The lead spokesperson and organizer for FairShake PAC, the umbrella group overseeing crypto spending this year, is Josh Brust, a former aide to current Senate Majority Leader Chuck Schumer and former New York Gov. Andrew Cuomo.Vlast built a reputation He won an award in Albany for his uniquely combative approach to reporters.
As of 2020, Vlast was the communications chair of the Jewish Democratic Council of America (JDCA) board of directors. Although typically known for being more liberal, the JDCA has recently moved toward closer alignment with AIPAC and its allies. For example, this year, JDCA will join AIPAC and DMFI. be against Incumbent progressive Representatives Jamaal Bowman (D-N.Y.) and Cori Bush (D-Missouri).
At the same time as Vlast runs Fair Shake, coordinate The billionaire-backed “Facts for Peace” is a pro-Israel movement founded after October 7 to create an information environment regarding the war in Gaza. Facts for Peace was one of the top ad buyers on the web during the early months of the war. Spending Nearly $500,000 for targeted advertising to counter online criticism of Israel.
Huge amount of spending on virtual currency This election year is buoyed by the recent rally in cryptocurrencies. Bitcoin's price has soared to an all-time high of $73,000, in part as mining slows and supply is limited. (Currently BTC is $69,000.)
The Biden administration supported this market rally and, in doing so, helped increase the deep pockets of donors currently spending on campaigns. SEC Chairman Gary Gensler, known for his staunch opposition to cryptocurrencies, sided Along with two Republican committee members, he called for legalizing the use of highly volatile Bitcoin by major financial institutions through exchange-traded funds.
Armed with a war chest, FairShake PAC is selectively racially selective in order to remove politicians critical of the industry and field new allies to replace them on both sides of the aisle.
The first victim was progressive Rep. Katie Porter (D-Calif.), who recently lost the California primary for the Senate seat vacated by the late Dianne Feinstein. Mr. Porter is a close ally of the industry's biggest thorn in the side, Elizabeth Warren, and has received support from the group Stand With Crypto, which voted against the overriding bill in the Financial Services Committee markup. Rated “F”.
Her opponent, Adam Schiff, now likely to become California's next U.S. senator, received an “A” grade after sending out a pro-cryptocurrency message on his blog. Campaign siteHe said he supports a “comprehensive regulatory framework” for virtual currency and blockchain companies to ensure “the United States remains a world leader in these important new technologies.”
Fairshake was the biggest outside spender in the race, pouring $10 million into negative social media and TV ads attacking Porter. Notably, the ad never directly attacked Porter's crypto record, instead calling her a hypocrite and an imposter who allegedly took the company's money. (This claim was questionable; the “big pharma” donation Porter allegedly received was a $500 donation affiliated with a company that had one FDA-approved drug, and a rival (It was acquired by a company.)
As Kelleher points out, it is clear that crypto PACs do not mention cryptocurrencies.
“This is effectively an admission that the American public is skeptical, if not hostile, of false claims about cryptocurrencies and is aware of the lawsuits,” Kelleher said. .
Whether cryptocurrencies can claim that their advertising influenced the primary election in a large state like California is debatable. Perhaps more importantly, Schiff's camp adopted an unusual strategy. Support Republican Steve Garvey.
But Porter criticized Fairshake's unusual involvement in the race after his defeat.she Controversial “unauthorized” comments This was a reference to the “shadow billionaires” behind crypto front groups.
Fair Shake and its affiliated super PACs are also intervening in the two most contentious front-line races that will determine which party controls the Senate. They are running against Democrats Sherrod Brown of Ohio and Jon Tester of Montana, ranking members of the Senate Banking Committee (Brown is chairman), who are critical of the industry. Mr. Brown is also a member of the Agriculture Committee, which has oversight authority over the Commodity Futures Trading Commission rather than the SEC. The commission is the body that crypto industry executives want to lead oversight efforts. Mr. Brown blocked a bill that would give the CFTC control over industry regulation.
In other words, cryptocurrency influence operations this election cycle appear to be motivated by winning more influence in the House while flipping the Senate to Republican control.
Republicans usually The challenge for these PACs is to gain more of a foothold within the Democratic Party, as it would be advantageous to have less regulation on cryptocurrencies. FairShake's top donors, Ripple, Andreessen Horowitz, and Coinbase, have given $1 million to House Majority PAC, the campaign finance arm controlled by House Minority Leader Rep. Hakeem Jeffries (D-N.Y.). Donating more than $1,000. Coinbase also added $500,000 to both the Republican Senate Leadership Fund and the Democratic Senate Majority PAC, according to campaign finance analyst Open Secrets.
Two races in particular represent crypto PACs choosing friendly Democrats to support in crowded open-seat fields.
inside New Plurality – Black 2nd Congressional District Shomali Figures has a boost in Alabama's Democratic primary runoff, thanks to $1.7 million in campaign contributions from Protect Progress.
And in Texas' 32nd Congressional District, Julie Johnson recently won a contested Democratic primary to replace Colin Allred, who is running for U.S. Senate.johnson Benefited from cryptocurrency funding In the same way.
Like Schiff, both Figures and Johnson have dedicated entire sections on their campaign pages dedicated to cryptocurrency support, a clear signal to super PACs seeking industry financial support. Voters don't seem to care that much. Cryptocurrency has never been listed in the top 20 priorities of any issue survey.
In certain races, crypto groups didn't have to spend any money to influence politicians' actions.fair shake is Said He still plans to jump into the Michigan and Maryland Senate races, but hasn't decided on a side yet. That looming threat is already shaping candidates' positions.
in Maryland Democratic Primary, Democratic Rep. David Tron and Prince George's County Executive Angela Alsobrooks have expressed an open stance toward cryptocurrencies, even though they have not taken strong stances in the past. Last year, Tron signed a letter with crypto critic Elizabeth Warren. to call The call for stronger enforcement has also recently been reflected in industry talking points.Tron is Said He said he believes in legal certainty for cryptocurrency companies so that the U.S. “keeps pace in the global race for technological advancement and economic competitiveness.”
Mr. Alsobrooks also sang He praised blockchain technology and said it would help “all Americans, including traditionally underserved communities, have the first chance to build generational wealth for their families.” It's helpful,” he emphasized.
As recent lawsuits have shown, poor communities are also the most exposed to crypto wallet siphoning.
