What Does Political Giving Look Like Post-FTX?

in pot by crypto related donors and donations. Among those donors Sam Bankman, Fried and Ryan Slamy of FTX, who supported candidates on opposite ends of the political spectrum. To be clear, the collapse of FTX has now led to some of those same politicians and willmakers who received donations from people like Bankman, Freed and Salami to attempt to distance themselves entirely from their benefactors. For more in the state of crypto money and politics in the US were

joined by Bloomberg reports. Alison Versprill Dam Big Ben Freed gave about thirty nine million dollars during the mid terms, almost all of it to Democrats, but Ryan gave you know, about twenty three million dollars mostly to Republicans. And Bill Allison, if you look at the numbers, I mean it's the ft X donors. There were three big donors. They represented about eight of everything that Crypto gave during the cycle. Bill, welcome back to the podcast. Please reintroduce yourself to our audiences.

And Bill Allison, I cover politics and campaign finance and Ali great to have you back in the show. I'm Alison versus Brill and I cover crypto regulation. So you know, between regulation and campaign finance and politics, some things have

been happening recently. I think it's fair to say, Bill, for people who don't sort of obsessively follow the twist and turns of either campaign finance or US politics, can you just do a quick scene set of what's been happening and what are the interconnections that you're observing between crypto and US politics right now? Well, we just had a midterm election, which is when um uh generally speaking, the party that holds the White House loses a lot of seats in Congress, and and this is to elect

basically the House and the Senate. UM. And we were expecting and even you know, a lot of people predicting a red way for Republicans to do really well, uh, taking the House by wider margin, taking the Senate, and instead we kind of had a status quo mid term. Um. Democrats are right now even where they were in the Senate, they may even pick up one more seat, and Republicans have narrowly won the House. Now, what this means for Washington is that we're going to be in a state

of gridlock. That's about where we are right now. And you know, crypto kind of falls into the middle of this because it is going to be an issue in the next Congress given what's happened uh in uh with f t X modern development. Since the stunning collapse of former billionaire sen Bankman Freed's ft X empire last week, one of the two biggest crypto exchanges in the world is no more. There are now reports of unauthorized withdrawals of funds after fd X and related entities were placed

in bankruptcy. And that's in't just that customers who are not able to withdraw funds are unlike recover much. There been accusations that it was misappropriating funds um using its ties with Alameda Research, the trading arm that was also founded by Sam Bankman Freed. And so we've definitely seen UM failures across the board that's now rippling throughout the crypto markets broadly UM, and we're starting to see other

companies suffer as well. So it's been a busy few weeks in the in the crypto space, if that might be the understatement of the century, as all of us can confirm the level of business. And you know, Bill, just to go back to your point, So the folks who were elected or not elected in some cases roughly what was the split in terms of either whether they were kind of funded by crypto money or had taken positions on crypto and one way or the other. So,

you know, crypto candidates did reasonably well. Um uh. You know among the people that they backed were like, for example, John Fetterman, the u AT candidate from Pennsylvania Democrat. He won his election. UM. A lot of the people that were backed by something called the g M I pack and the web three Forward pack. House and Senate candidates did well. So you know a lot of things broke the way that the crypto industry wanted. But we're only

talking really about. You know, maybe you know fifteen twenty people and in a Congress of you know, four thirty

five House members and a hundred senators. That's not definitive, but this is sort of how things go on Washington, that you kind of get the beachhead of people who care about your issue and know about your industry, uh in place, and then you know the ideas that then you would work with the lobbyists where they would work with the lobbyists and other folks who are part of the government relations people of from that industry, who would you know, basically spread the word to other members of

Congress and uh, you know. So so in that sense, I mean, I think the crypto was able to do

what it wanted to. You know. One of the things that has not necessarily been clear is that there is like a unified crypto US as it were, right, And a big criticism levied against Sam bank mun Freed is that he had positioned himself as this person who was advocating for certain types of regulation ostensibly on behalf of the whole crypto industry, but in in terms of the details in ways that would have benefited his particular slice

of that industry. In particular, are there other things that over the course of the mid terms, or at least the candidacy of the mid terms, that you saw sort of emerges campaign issues. If I would have put it another way, like did the average person voting in these elections, were they voting on like because I'm poor against bitcoin? Or was it just that these candidates happened to have money flowing into them from crypto candidates? If that makes sense,

I would say it's it's much more the latter. I mean, they're there. There weren't really people who were running strictly hun crypto. I mean, you know, you know, getting back to John Federman, I mean a lot of his campaign was that his opponent was had moved to the state recently from New Jersey. So doctor his opponent, yes, Dr Oz,

the celebrity physician. Um. So you know, and you know, when we talked to people who are you know, we're kind of in the space in the political realm, you know, when they're looking for candidates, and it's not necessarily that they're looking for experts on crypto or people who are you know, completely immersed in the industry, But what they were looking for was, you know, kind of younger candidates, people who were open to crypto, maybe they had a

friend who invested, you know, a lot of the superpack kind of candidate recruitment stuff that went on UM and and you know, and in terms of backing the candidates, and it's not really candidate recruitment, but you know, choosing candidates, they were just looking for people who would be open to uh, you know, open to and understand and have some basic background in crypto. And obviously, UM, you know, I think that it's something that's important, it needs to

go forward. But when you get into the nitty gritty of what you know, American politicians run their campaigns on. I mean, it's a lot of negative ads and a lot of mud slinging and uh, you know that this is not the place where you have serious policy discussions about digital assets. And I'll just back up that point. I think, I think the strategy going forward is good

to be to continue targeting these younger candidates UM. I talked to the executive director of the Blockchain Association, which REACHED recently launched their own pack that we expect will be more active and sort of the coming elections, and that was essentially what they laid out to me that they feel like these older lawmakers are not as a receptive to maybe new technologies, and so that's really what

they're targeting. Um. I guess it remains to be seen now what the attitudes like given everything that's been happening in crypto and the you know, more recent calls for regulation. But we'll have to see how that shapes up. Well. To that point, there's an interesting thing that happens in politics, but also I think in general, a where someone can go from like hero to zero in a very short

amount of time. And as we've been reports in various of the folks who had previously been like tripping over themselves to be in photo ops with bank man freed and now like to quote Mariah carry famously, I don't know her. Um, how is that shaping up going into

you know, this next round of things. Are you going to see or are you already seeing a sense that crypto is now being like perceived as this toxic asset that nobody wants to touch, or is it opening up the discussion about here, here's actually why we need to engage with digital assets more seriously. I think we're seeing a couple of things. I mean, you're definitely seeing lawmakers

distancing themselves from Sam Bankman Freed. So a good example of that is Senator Dick Durbin was one of those people who received contributions from Sam, and he's now saying that he's going to give that money to charity. Um. He's also one of the ones leading some of the probes into Bankman Freed along with Senator Elizabeth Warren. They're both seeking more information on what happening happened when the company collapsed. UM. So you're definitely seeing kind of a

turning of the tables. I think we're also seeing this getting highly politicized. Um. You have Missouri Republican Josh Holly is now sort of coming after Democrats. He took money from Bankman Freed and looking for information from federal agencies and Democrats that were engaging with him. Um Worth noting that it wasn't only Democrats that were receiving money from ft X. Obviously, Ryan salome A was a big donate donor as well, and he gave almost exclusively exclusively to Republicans.

So everyone is sort of caught up in this. And Ryan Solomy, of course, being one of the co c e o S is one of one of the FTX related entities FTX Trading, which he helped Sam Bankman Freed set up being this major Republican donor as you've identified. Yes, that's right. I mean we saw that Sam Bankman Freed gave about thirty nine million dollars during the mid terms,

almost all of it to Democrats. Um, but Ryan gave you know, about twenty three million dollars mostly to Republicans, so um, it was still a lot of money coming to the Republican side as well. Coming up more on crypto's influence on regulation and politics in the US with Alison Verse Brill and Bill Allison now going into three even four sort of staring now in a presidential election. Somehow I feel like we're somehow always in a presidential

election given the dynamics that you've both just described. And Bill, I'll ask you this first, do you expect, given kind of the state of crypto right now, where evaluations are where sentiments is that you will see the record highs of donations from crypto affiliated groups that we've been seeing for previous cycles, or do you think that was kind of like the top of that level of giving from this industry. If you look at the numbers, I mean it's the fd X donors. There were three big donors.

They represented about eight of everything that crypto gave during the cycle. I you know that altogether it was about you know, eighties some million dollars and you know, they were basically providing the bulk of it um. So the fact that they may not be in the position to donate that was obviously going to put a big primp in and how you know how much money this industry is going to put into politics. But that being said, there's all kinds of different ways to have a big

footprint in Washington. One of the you know, the traditional way. You know, if you look at a financial firm, I'm just going to pick them. Uh. You know, Goldman Sacks, which has been very influential, has a strong presence in Washington, has lobbyists, has a political action committee. Goldman Sacks folks aren't making million dollar contributions to super PACs. They're making contributions to party committees, They're making contributions to candidates, They're

making contributions to leadership packs. They have an active political action committee. And that's really I think where you may see crypto going is instead of being this this big splash, you know, three people giving tens of millions of dollars, you're going to see a lot a lot of smaller donors but having a you know, potentially having a bigger, more distributed impact. And I would say probably also depends on where we stand on the regulatory and legislative front

the next time we have an election. Right if if there's still a lot up in the air and there's potential to you know, influence um what's going on on Capitol Hill or at these agencies, then I think you could see a lot of crypto executive giving money in an attempt to sway the narrative there if they still have money. That is true, we shall just have to

see which we markets do bill. Just as a kind of a closing thought for you, as someone who's covered campaign finance for such a long time, can you think of any other industries that sort of kind of the amount of newhere as it relates to giving, Like did we see something like this in the you know, the middle days of tech for instance, Because you know, folks are always trying to you know, figure out like what is crypto like and at least in terms of this

parts of the markets, are there progenitors as it were, for this level of giving from a relatively new industry and asset class. I mean, you know, the things that it most reminds me of. I mean, you know, tech is an example where Microsoft had the you know, almost a monopoly in terms of you know, not just software for your operating system, but also things like browsers and

Microsoft Word in the office suite. And they had hardly any presence in Washington at all until Washington started to get interested in them and started investigating them for antitrust. And Microsoft went from hardly lobbying at all to building up like almost overnight. They had their DC office, they had their pack, they were giving lots of money. And you know that's the sort of the um that's sort of the I don't know if I would necessarily call

it positive. That's kind of like the successful version of it, a less successful version. And this was a company that had been around for a long time. Was Enron, where you have you know, they're in this like you know, new deregulated world of of utilities and natural gas and and they had very close ties of the Bush family, going all the way back. You know, ken Leigh, who was the company's CEO, was George H. W. Bush's head

of finance, so he was his top fundraiser. They were the biggest patron for George W. Bush when he was in Texas in terms of campaign contributions and donations and whatnot. And when that company collapsed, everybody walked away from it.

I mean, George W. Bush said that he hardly knew anybody at Iron, and I guess the point is it's not necessarily, you know, one company, although obviously Enron was a huge story at the time, but you know, you can walk away from a company, but not necessarily the industry. And just because everything in finance is somehow a circle. The person who helped liquidate Enron and get cash back to those creditors, John Jay Ray the Third is now doing that for FTS, so as one does here. We

are well. Thank you both very much. It's always a pleasure having you on and I'm sure we'll have you back again soon since there is so much in this area to talk about. Thanks for having us, Yes, thank you. You can find more of their reporting on the Bloomberg terminal and on Bloomberg dot com. And of course you need to check out our twice weekly newsletter, which is called You Guessed It Bloomberg Crypto. This is Bloomberg Crypto,

a daily podcast from Bloomberg and I Heart Radio. For more shows from I Heart Radio, visit the I Heart Radio app, Apple Podcasts, or wherever you get your podcasts. Send us your comments, questions, or suggestions for the show to Crypto at Bloomberg dot net. The supervising producer of Bloomberg Crypto is Vicky very Galina. Our senior producer is Janet Babin. Our producers are Mohammed Faruk and Sharon Barriro. Our associate producers are Ty Butler and Moses on Them.

Desta wonder At is our engineer. Original music by Leo Sidron. I'm Stacy Maria Schmel. We'll be back tomorrow