In a decisive step towards rectifying campaign finance irregularities, the Department of Justice (DOJ) has called upon U.S. lawmakers to relinquish FTX-linked political donations. This instruction has spurred a wave of compliance across several congressional campaigns, illuminating a striking new dimension in regulating campaign funding.
Among the lawmakers contacted was Rep. Bob Latta, R-Ohio, whose campaign benefitted from a generous donation from Ryan Salame, the ex-chief executive of FTX Global Markets. Salame’s political spending during the 2022 midterm election cycle was formidable, with nearly $23 million directed predominantly toward Republican candidates. Upon receipt of the DOJ’s notice, Latta’s campaign quickly complied, voluntarily surrendering the funds.
Furthermore, the campaign supporting Lori Chavez-DeRemer, R-Ohio, also succumbed to the DOJ’s directive, indicating an intensified scrutiny of cryptocurrency-linked political funding. This action was echoed by Reps. Marc Molinaro, R-N.Y., Elise Stefanik, R-N.Y., and Brian Fitzpatrick, R-Penn., redirected their FTX-affiliated donations to the US Marshals.
Implications and reactions to FTX’s financial fallout
The DOJ’s move follows a wave of uncertainty surrounding FTX’s bankruptcy and the mounting legal issues facing its founder, Sam Bankman-Fried. Responding to this evolving situation, several lawmakers have opted to redistribute their FTX-derived contributions. Sen. Dick Durbin, D-Ill., and Rep. Jesús “Chuy” García, D-Ill., pledged to donate the $2,900 they each received from Bankman-Fried following FTX’s bankruptcy filing.
Moreover, Rep. Ritchie Torres, D-N.Y., allocated his FTX-associated contributions toward local charity efforts. Despite this generous gesture, the legal landscape surrounding such donations remains uncertain. Charities are not immune from regulatory actions, as reiterated by Jason Lilien, a partner at Loeb and Loeb.
Traditionally, surrendered and clawed-back funds are channeled toward settling the dues of customers, victims, and creditors. However, these efforts’ scope and current status are not yet clearly defined, raising questions about the fate of the substantial number of charities and non-profits that were beneficiaries of FTX-related political donations or direct contributions from Bankman-Fried.
Amid this turmoil, it’s worth noting that Bankman-Fried’s extensive contributions have positioned him as the Democratic Party’s second-largest individual donor, with about $39.8 million in donations.