FTX Lawyers Threaten Politicians: Return Donations or Be Sued
Last week, FTX bankruptcy lawyers sent private letters to politicians and PACs that received donations from the company. They gave them until February 28th to return the money or face legal action.
A company statement states that “to the extent such payments are not returned voluntarily, the FTX Debtors reserve the right to commence actions before the Bankruptcy Court to require the return of such payments, with interest accruing from the date any action is commenced.”
Based on data provided by the Federal Elections Commission, Coindesk, a cryptocurrency news portal, was identified 196 U.S. senators & representatives who accepted FTX contributions. Unusual Whales is a trading platform that allows retail traders to compile their own FTX donations. The total number of political recipients FTX money, who gave it to whom and whether or not it was returned.
Legal experts say it would probably be wise for the politicians to comply with FTX attorneys’ request before things go to court.
“John Ray [CEO of FTX in bankruptcy] and his team will likely pursue fraudulent transfer litigation against politicians and PACs if they do not return the funds, as FTX has repeatedly requested,” The Epoch Times spoke with Thad Wilson who is a King & Spalding bankruptcy expert and a partner. Even though politicians may be entitled to legal representation, he stated that going to court would prove costly for those who have only received a few thousand. “would probably be better off returning the money. For larger recipients, like PACs and parties, the economics may look very different.”
Wilson cited Craig Berkman’s precedent as a financier. SEC charges with defrauding investors, who had donated to the presidential campaigns of John McCain, Mitt Romney, Mike Huckabee, and Rudy Giuliani in 2007–2008.
“After Berkman filed for bankruptcy in 2009, many of the campaigns and candidates who received funds from Berkman were sued and/or returned the funds to Berkman’s bankruptcy trustee,” Wilson said.
Collapse of FTX
Sam Bankman-Fried (FTX founder) and other top FTX executives lavished extravagantly More than $70 Million a look at politicians and political organisations leading up to 2022 midterm elections. FTX is the third largest political donor, and Bankman Fried the second largest donor to the Democratic Party following George Soros.
According to data compiled by the Committee to Unleash Prosperity (led by economist Stephen Moore), Bankman-Fried gave $40 Million to Democratic candidates. Ryan Salame (his co-CEO), reportedly donated more than $20 million for Republicans and conservative groups. Nishad Singh, FTX engineering director, reportedly gave almost $13 million to Democrats.
After the collapse of FTX (his Bahamas-based cryptocurrency exchange) and Alameda Research (his crypto hedge fund), Bankman-Fried, was arrested in December for securities fraud. The United States was then requested to extradite him to face charges including wire fraud and securities fraud. He was quickly released on a $250 million bond and is residing at his parents’ home in California, which was put up as collateral for the bond.
‘Timing of the Charges’
The House Financial Services Committee is currently investigating the FTX probe. Committee Chairman Patrick McHenry (R-N.C.) and Oversight and Investigations Subcommittee Chairman Bill Huizenga (R- Mich.) issued a letter on Feb. 10 to SEC Chairman Gary Gensler demanding to know why Bankman-Fried was arrested just prior to his scheduled testimony before the House of Representatives on Dec. 13 and instructing him to preserve all records between the SEC and the Justice Department in connection with Bankman-Fried’s arrest.
“The timing of the charges and his arrest raise serious questions about the SEC’s process and cooperation with the Department of Justice,” The letter says so. Bankman-Fried was expected to be interrogated at this hearing, among other matters, about his political ties, and donations.
Bankman-Fried, at the height of his fame was considered a financial genius and selfless humanitarian. His fortune reached $16 billion at one stage. He pledged to give all of his wealth away to progressive causes, such as saving the environment or preventing pandemics. He supported a bipartisan bill to regulate crypto markets, known as the Digital Commodities Consumer Protection Act.
Sens. sponsored this bill. Debbie Stabenow (D-Mich.), John Boozman (R-Ark.), Cory Booker (D-N.J.), and John Thune (R-S.D.), all of whom received at least $5,800 in political Donations From Bankman-Fried. Bankman-Fried. Received More than $25,000
Among the largest overall recipients was President Joe Biden’s 2020 election campaign, to which Bankman-Fried reportedly donated More than 10 million You can find them in many forms. Karine Jean-Pierre (White House Spokesperson) refused to answer a question about whether Biden would return the money. She stated: “I’m covered here by the Hatch Act.” Jean-Pierre said that she was “limited on what I can say and anything that’s connected to political contributions.”
In 1939, the Hatch Act banned federal funds from being used for electoral purposes. Federal officials are also prohibited from coercing support by promising public jobs or funding. It is unclear how the Hatch Act prevented Jean-Pierre from answering reporters’ questions.
‘You Have to Be Just’
Bruce Markell, a former bankruptcy court judge who is now a Northwestern University law professor, says the answer to whether or no FTX will succeed in recouping political donations in court is “a strong maybe.” FTX lawyers will likely claim the donations were fraudulent according to bankruptcy laws which allow “debtors in possession” You can recover donations that were made up to two year before bankruptcy filings.
FTX lawyers could argue that fraudulent transfers are possible because the company was insolvent when the donations were made and that therefore the money belongs to FTX creditors.
“The words have been used, ‘you have to be just before you’re generous,’” Markell stated. Companies that are insolvent “have to pay creditors before you make donations.” With FTX accounting in notorious disarray and the high volatility of the valuations of FTX assets, however, the timing of the company’s insolvency could be a gray area.
“Google can make all the donations in the world they want because after they make donations, they have enough money left over to pay the creditors,” He elaborated. “FTX is an accounting nightmare.” If it is possible, it would take many years to reach a court resolution.
Some people who received the money have chosen not to gamble and returned it to FTX or the U.S. Treasury Department. Some recipients claim they donated the money to charity. However, giving away the money may not be a good idea.
‘Donation to a Third Party’
“Recipients are cautioned that making a payment or donation to a third party (including a charity) in the amount of any payment received from a FTX Contributor does not prevent the FTX Debtors from seeking recovery from the recipient or any subsequent transferee,” FTX warns.
“Making a charitable contribution is a nice public relations ploy to try distance yourself or your campaign from allegedly corrupt contributors,” Wilson said. “But giving the money to charity does not absolve a politician or her campaign from liability under the Bankruptcy Code or applicable state law.”
“The charities who receive money from politicians could be considered ‘subsequent transferees’ for fraudulent transfer purposes, and thus, they could get sued, too,” He stated. “In fact, the politicians and PACs could be making things worse for the charities to which they are donating.”
Even if the money was already spent, the PACs could still be liable for millions of dollars in repayments.
“As a ‘transferee’ of the funds, they would be liable for the payment if a court determines it was a fraudulent transfer,” Wilson stated. Wilson added that it is possible that vendors or other organizations that were paid through PACs may also be on the hook. “subsequent transferees.” Bankman-Fried or his family could be held liable if FTX funds were received by them, or if the funds are discovered to have been used for their personal use. “aiding and abetting” Fraudulent transfers
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