Months ago, executives of the cryptocurrency exchange FTX threw their support behind then-candidate Becca Balint’s Democratic primary bid for Vermont’s lone seat in the U.S. House.
Now, their cryptocurrency empire is collapsing and threatening to take down the rest of the trillion-dollar industry with it.
In a matter of days, FTX has fallen from a $32 billion giant into bankruptcy. Its collapse is largely attributed to top executives’ decision to lend billions of customer dollars to an affiliated hedge fund, Alameda Research, without the cash on hand to cover the loan. In its periphery are a reported criminal investigation of the company in the Bahamas, a possible hack that stole hundreds of millions in assets and accusations from company insiders that the financial giant was operated “by a gang of kids” in the Caribbean nation.
At the heart of the controversy is Sam Bankman-Fried, a 30-year-old billionaire who founded both FTX and Alameda Research. Also in the mix is Nishad Singh, an FTX executive who was reportedly aware of the loan scheme, and whose $1.1 million donation to a political action committee, or PAC, helped fund a wave of pro-Balint advertising in the run-up to her primary win.
Bankman-Fried became a celebrity of the crypto world and gained additional fame from his purported belief in the charitable philosophy known as “effective altruism.” He also said earlier this year that he would be willing to pour up to $1 billion into political campaigns before 2024, though he reneged on that commitment last month.
Before his donations dried up, Bankman-Fried and his brother, Gabe Bankman-Fried, each donated the maximum $2,900 to Balint’s primary bid in June. Balint also received the endorsements of each of the brothers’ PACs, which claim to be focused on electing officials who will invest in preventing future pandemics.
In the final weeks before Balint’s hotly contested primary race against Lt. Gov. Molly Gray, progressive and LGBTQ+ advocacy PACs poured $1.6 million into Vermont, flooding airwaves and stuffing mailboxes with pro-Balint campaign ads.
In late July, when the Gray campaign cried foul on the outside spending, Balint’s campaign manager, Natalie Silver, told VTDigger, “‘Molly Gray is very close to saying, you know, ‘We don’t want a gay agenda.’”
“She’s calling these ‘special interests.’ These aren’t special interests. These are gay people. This is the LGBTQ community. This isn’t beet farmers. This isn’t big ag. This isn’t oil. These are people who are afraid for their lives right now,” Silver said at the time.
Only after the Aug. 9 primary was it revealed that one of these groups, LGBTQ Victory Fund, was largely funded by a single, major donor. Singh, a former MIT classmate of Bankman-Fried, donated $1.1 million to the Victory Fund during the Balint campaign’s final primary stretch, nearly all of which appears to have been directed toward electoral efforts helping Balint.
According to Reuters, Singh and other top FTX executives were aware of the move to lend billions of customer assets to Alameda.
Silver told VTDigger on Monday that Balint was unavailable for an interview to discuss the fallout of FTX’s bankruptcy and the company executives’ support for Balint during her primary campaign.
“I’ve been saying for a long time this industry needed regulation,” Balint said in a written statement Monday. “Clearly it desperately does.”
Balint isn’t alone in her calls for greater regulation on the industry. U.S. Treasury Secretary Janet Yellen told Bloomberg News on Saturday that FTX’s implosion “shows the weaknesses of this entire sector.”
Silver told VTDigger on Monday that Balint never met with Sam Bankman-Fried, nor did any members of Balint’s campaign team. Balint did, however, meet Gabe Bankman-Fried at an event in Washington, D.C. ahead of the primary. She and her team also attended a separate endorsement meeting with a team from Gabe Bankman-Fried’s PAC, conducted electronically over Zoom, according to Silver. Gray also met with the PAC, her campaign said in June.
“I want to really assure Vermonters that I had absolutely no knowledge of who was donating money to the Victory Fund, which is an LGBTQ organization,” Balint said at a congressional debate in September. “I did not want that investment in my campaign. I had no control over it. The thing I did have control over was how I ran my campaign, which was with many, many small-dollar donors, the most Vermont donors of any of the candidates.”
The LGBTQ Victory Fund declined to comment on Monday.
While Sam Bankman-Fried has maintained that his political efforts were aimed at preventing future pandemics, skeptics have questioned whether the ultimate goal was to push officials toward a light-touch approach to regulating the cryptocurrency industry.
At the September debate, which was hosted by VTDigger, moderators asked Balint which government agency should regulate the cryptocurrency market — the industry-favored Commodity Futures Trading Commission or stricter Securities and Exchange Commission.
“I don’t think in this instance we should follow the guidance of the industry,” Balint said at the time. “I think we want to really have a strict investigation of what this really means for our economy.”
Read the story on VTDigger here: Billionaire supporters of Balint’s primary bid find themselves at center of cryptocurrency industry collapse.