FTX seeks to recover money given to politicians

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FTX’s new leadership is pressuring hundreds of politicians and political organizations to return millions of dollars donated by the crypto platform or its founders before it went bankrupt last year.

The company, which collapsed in November and is now at the center of a massive federal fraud investigation, said it sends “confidential messages” to political figures, political action funds and other recipients as it sought to recover assets to repay its 1 million creditors. In a statement on Sunday, FTX said the donations should be returned by the end of the month. If they are not, FTX said it reserves the right to sue the recipients.

“To the extent such payments are not voluntarily returned, the FTX debtors reserve the right to bring actions in bankruptcy court to demand the return of such payments, with interest accrued from the date on which any action is taken,” the statement said. The company added that recipients who donated the funds to a third party, including a charity, are not spared.

During FTX’s heyday, founder Sam Bankman-Fried was a fixture in DC politics, pushing for light regulation of the nascent crypto industry and becoming one of the biggest contributors to the Democratic Party. Bankman-Fried himself gave about $40 million to campaigns and political action committees, largely backing Democrats, during the 2022 midterm election cycle, according to Federal Election Commission records. .

Bankman-Fried later told reporter Tiffany Fong that he had donated an equal amount to Republicans, but that those donations were “bleak”.

Federal prosecutors allege that FTX, under the direction of Bankman-Fried, stole funds from customer deposits to make political donations, buy luxury real estate and cover losses at its hedge fund, Alameda Research.

Bankman-Fried pleaded not guilty to eight counts of fraud and conspiracy last month. Two of his former associates, meanwhile, pleaded guilty and implicated Bankman-Fried in the alleged crimes.

Separately, on Monday, FTX CEO John Ray III, who took over from Bankman-Fried when the company filed for bankruptcy, testified about the company’s cybersecurity infrastructure, which he called ” very loose” and “vulnerable”.

“Literally, one of the founders could walk into this environment, download half a billion dollars worth of wallets onto a USB drive and walk away with them, and there would be no accounting for that,” he said. , adding that such lapses would be “virtually unthinkable…in a controlled environment.”

He described the process of securing FTX client passwords and wallets in the first 48 hours of his leadership as “pure hell”. Ray became CEO in November, replacing Bankman-Fried. In the weeks between Nov. 11, when he took over the business, and the end of the year, Ray told the court he earned about $690,000 in fees, excluding expenses.

Ray’s testimony underscored his previous accounts of entering a company in disarray. Ray, who oversaw the liquidation of Enron, said in November he had never seen such a “complete failure of corporate controls” and lack of reliable financial statements in his career.

The judge handling the case was assessing efforts by the U.S. trustee, which represents the Justice Department in bankruptcy cases, to install a court-appointed independent reviewer to oversee FTX’s bankruptcy.

FTX’s attorneys argued against such a decision, saying a reviewer would be duplicative, unnecessary and costly, with the burden borne by FTX’s creditors.

The US trustee argued that the allegations of fraud and misconduct are “too significant to be left to internal investigation”.

Judge John Dorsey has yet to rule on the examiner’s question.


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