In late May, Sam Bankman-Fried joined a roundtable put on by the Commodity Futures Trading Commission, the regulator entrusted with the American financial system’s derivatives markets, to pitch one of his biggest and boldest ideas.
The then-CEO of FTX, the most well-reputed of the bigwig crypto firms, wanted to overhaul the derivatives industry by cutting out intermediaries and allowing FTX to clear his customers’ crypto swaps directly by relying on an algorithm that would automatically liquidate client positions during times of stress. The proposal had the potential to dramatically alter the structure of the industry, which the CEO of one futures brokerage said that day could lead to flash crashes and even a “weapon of mass destruction” while potentially radically expanding the involvement of retail investors in the complex and risky futures market.
Beyond the particulars, though, Bankman-Fried appeared focused on making sure the CFTC, rather than the better-funded and more feared Securities and Exchange Commission, became crypto’s primary regulator.
At the roundtable, Bankman-Fried—who, characteristically, tweeted through the event—played the role of the boy genius to an often receptive crowd. “There were a lot of people there who seemed to be taking some type of pleasure or delight in the fact that they were in the same room with him,” said Lee Reiners, a former financial regulator and current policy director at the Duke Financial Economics Center, who sat near the FTX CEO at the roundtable. The few times Bankman-Fried was attacked, he lashed out, saying at one point: “Most of the traders on our platform know a lot more about these contracts than many of the people in this room.”
A self-admitted crypto skeptic, Reiners had made his displeasure with the proposal known, calling it a “bad idea” weeks earlier. So had others. But before FTX dramatically blew up this month, that skepticism was hard to find in D.C., as Bankman-Fried was in the midst of a masterclass in bending Washington, D.C. to his will by way of every trick in the political playbook: not only by donating more than $40 million dollars to various political causes and characters, but also by ingratiating himself with a favorite regulator, hiring insiders with influence, cribbing plays from Blackstone and BlackRock, snapping pictures and otherwise hobnobbing, and pitching himself as a humble and demure billionaire, less interested in the traditional trappings of fame and fortune than in helping make the world a better place.
“Sam Bankman-Fried influenced Washington across basically every mechanism available,” said Jeff Hauser, who runs the Revolving Door Project at the Center for Economic and Policy Research. “I’m not sure I can think of anyone who developed such a sophisticated approach so quickly upon ascending to the levels of the elite.”
“He played D.C. like a fiddle. No doubt about it,” agreed Reiners.
On the whole, Washington was not particularly sure what to think of crypto, and Bankman-Fried stepped in as the central voice to help explain the convoluted, burgeoning industry. “He was more than happy to play that role,” said Reingers. It was no surprise, considering his own family’s familiarity with the ins and outs of Washington. His mother, Barbara, had founded a left-wing super political action committee, or PAC, focused on donations from Silicon Valley executives, and his father, Joseph, has testified before Congress about tax compliance issues, even helping Massachusetts Sen. Elizabeth Warren to draft tax legislation in the past. (Warren is now going after FTX.) Bankman-Fried’s brother, Gabe, had worked in Washington as a congressional staffer.
In the lead-up to his firm’s bankruptcy, back when he was worth more than $15 billion on paper, Bankman-Fried’s presence and money had begun to loom over Washington, where he purchased ads in subway stations and hosted snazzy parties to “showcase” his lobbying operations to financial lobbyists and former regulators.
As a donor, Bankman-Fried made his name known early and often, donating tens of millions of dollars to various PACs , $5 million to Joe Biden’s presidential election campaign and other doling money out to Democratic candidates like Joe Manchin and Beto O’Rourke, but also by spending more than $12 million this year backing an Oregon congressional candidate who ran on on pandemic preparedness and subscribed to the philosophy of effective altruism movement, two of Bankman-Fried’s non-crypto pet issues. (The candidate lost badly.) All told, Bankman-Fried pushed more than $46 million into the political fight, according to data collected by the nonprofit data tracking organization OpenSecrets.
But it was the potential of what he could spend that hovered over Washington more than anything else—especially after May, when he said on a podcast released the day before the roundtable that he planned to spend more than $1 billion on political donations. “Washington runs on money, and he was flashing it around,” said Reiners. (Bankman-Fried later backtracked on the promise, saying just last month, “That was a dumb quote on my part.”)
In appearance and opinion, Bankman-Fried was the sort of person that Washington loved anyway—outwardly brilliant but not ostentatious, with his heart in the right place. His signature look of floppy hair, shorts, New Balances, and T-shirts made him hard to miss, particularly when he was on stage with Tony Blair and Bill Clinton (at a FTX conference in the Bahamas), but it also made him appear non-threatening. Political journalists and politicians alike ate up evidence of his “monk-like aesthetic,” like stories that he drove a Toyota Corolla, used his parents’ Netflix account, crashed on his brother’s couch when he visited D.C., and slept on a bean bag chair. (Less often stated was that he owned a multi-million dollar property in the Bahamas.)
It isn’t surprising that a famed prodigy with an insider’s understanding of the ways of the capital and an effectively bottomless checking account would gather influence over the nation’s political class. What truly set him apart, though, may have been his pitch: Bankman-Fried’s well-publicized plan to make as much money as possible and then give it all away—a philosophy known as effective altruism—differentiated him from the scores of wealthy people who waltz into Washington hoping to get their way. “By presenting himself as this monastic person who was only earning to give, he gave himself a sort of benevolent affect and he made people trust him,” said Hauser. “His ascetic aesthetic and purported generosity just made him seem like the type of person who could be an oracle to Washington as they tried to understand crypto.” The strategy proved as successful as it was innovative. It was a “pretty new tactic to make one’s profit-seeking corporation seem like a philanthropy, and I think was an extremely effective tactic,” said Hauser, who believes Bankman-Fried was more politically savvy than Bill Gates had been in the 1990s when he was trying to stave off antitrust scrutiny.
While crypto critics saw his push for the CFTC to regulate crypto instead of SEC as a play for softer regulation by a less powerful regulatory body, it also nevertheless gave him “the appearance of someone who was embracing regulation,” said Reiners. In interviews, Bankman-Fried would say the prospect of “comprehensive regulatory framework” “excited” him since it was “absolutely what’s needed to protect consumers and get real federal oversight of the industry.” At the CFTC roundtable, Bankman-Fried said his concerns about protecting customers and managing systemic risk inspired him to start “FTX in the first place.”
How concerned Bankman-Fried was with financial stability remains an open question. Prior to the roundtable, Bankman-Fried had visited Dennis Kelleher, the cofounder and CEO of Better Markets, a nonprofit focused on fortifying the US. financial system. In a conference room, Kelleher and Bankman-Fried discussed the CFTC proposal. Kelleher, in his telling, expressed concern that FTX would target retail investors, who had recently been burned following the Gamestop frenzy. When Bankman-Fried responded that retail investors were not a core part of FTX’s business plan, and that FTX was focused on the institutional investor, Kelleher was miffed: Why, then, had the company had spent aggressively on advertising, signing celebrity endorsements, winning the naming rights for the Miami Heat’s arena and purchasing a Super Bowl ad starring Larry David? Or put a Robinhood vice president on FTX US Derivatives’ board of directors?
Kelleher left the meeting unimpressed, he said. “We asked him a bunch of questions that he didn’t have very good answers to,” said Kelleher. After the meeting, Better Markets followed up with a request for documents that would help them better understand the company and proposal, which he said FTX did not provide—a “red flag” in Kelleher’s view, but one that made sense as well. “I think they were pretty confident that they were going to get what they wanted,” said Kelleher.
Kelleher became convinced that while FTX’s proposal would have been “extremely lucrative” for the company, it would have been “dangerous” for consumers and the American financial system more broadly. In June, he sent a letter to the CFTC excoriating the May roundtable, saying it had been “unbalanced” and “dominated by industry interests.” He also took aim at Bankman-Fried directly, saying he responded in “a dismissive, disrespectful, insulting and unnecessarily hostile” manner to “credible” concerns about normal people being able to make complicated, high-risk, highly leveraged futures bets around the clock, potentially financially ruining them.
“The roundtable was a sham,” said Kelleher. “FTX and Sam Bankman-Fried found a very, very, very warm reception at the CFTC.”
Bankman-Fried happily reciprocated, there and elsewhere. Though he was running a sprawling multi-billion dollar international empire, Bankman-Fried made time to meet with seemingly anyone in Washington that he could. “He was going and meeting with people that most CEOs don’t meet with,” said Reiners. And many were happy to oblige. He snapped photos with Democratic congressperson Maxine Waters and Republican CFTC commissioner Caroline Pham, who, days after taking the job, posted a photo on Twitter of her with Bankman-Fried, joking that his hair was “better than mine.” (The post was later deleted.)
“It all seemed very chummy,” Hillary Allen, a law professor at the American University, Washington College of Law who attended the CFTC roundtable and opposed the FTX proposal, previously told Motherboard. “I don’t want to cast aspersions on the people he was meeting with, but he had a lot of access. And so when you have a lot of access, you have opportunities to describe your version of events.”
When he wasn’t meeting influential people or influencers, he was hiring them. The third person in the now-deleted photo with Pham, Mark Wetjen, had joined FTX US as head of policy and regulatory strategy after his own stint as a CFTC commissioner. A former CFTC lawyer also joined FTX US as general counsel, and former CFTC commissioner Jill Sommers joined FTX US Derivatives’ board. (The CFTC’s current chairman, Rostin Behnam, meanwhile said in late September that “Bitcoin might double in price if there’s a CFTC-regulated market.”) Outside the CFTC, Bankman-Fried employed, in various roles, Kamala Harris campaign alum Dave Huynh and Data for Progress’ Sean McElwee, and Jenna Narayanan, a longtime adviser to liberal billionaire and former presidential candidate Tom Steyer.
FTX also made deals with groups like the lobbying firm T Cap Solutions, run by a former CFTC chief of staff, and Bankman-Fried donated to liberal think tanks like the Center for American Progress as well. He and his various ventures invested in the media, too, helping to jumpstart Semafor, funding a Vox reporting project (“now on pause”), and even reaching out to the likes of FiveThirtyEight’s Nate Silver and political writer Matt Yglesias about the possibility of launching a Substack competitor (though they weren’t too interested).
While Bankman-Fried donated to numerous Republican causes and candidates—including the likes of Susan Collins and Lisa Murkowski—it was his co-CEO of FTX Digital Markets, Ryan Salame, who donated millions to the Republican cause (more than $20 million overall, per OpenSecrets). That included the launch of the American Dream Federal Action, a PAC focused on “forward-looking Republican candidates.” The division of donations between both parties by different individuals surprised Hauser, who said it was a sophisticated tactic most often used by financial firms like Blackstone and BlackRock. “That was a pretty advanced maneuver,” he said. (Bankman-Fried has suggested that’s not the case. “Ryan and I care about some of the same issues—particularly preventing the next pandemic—and we each make giving decisions that we think will advance those goals,” he said in July.)
Bankman-Fried and other members of the FTX tribe seemed to understand the power and influence of money in Washington almost intuitively. In May, after Bankman-Fried finished testifying before the House about an FTX proposal, Illinois Republican Rodney Davis expressed his continued “concerns” about it. After that, Salame’s PAC spent $2 million on his campaign, more than it spent on anyone else, according to the Los Angeles Times. Previously, it had spent $166,000 on Davis’ campaign.
Then, in August, Senate Democrat Debbie Stabenow and Republican John Boozman—the top representatives of their respective parties on the Senate agriculture committee that oversees the CFTC—introduced a bill seeking to define cryptocurrencies not as securities but commodities, just as Bankman-Fried wanted. Notably, Salame’s PAC spent $1.2 million pushing Boozman in the primary, and Bankman-Fried donated to Stabenow. (“When somebody’s stuffing your pockets full of money, you tend to agree with them,” said Kelleher of political donations generally.)
Publicly, Bankman-Fried positioned a lot of his politics as first and foremost about the long-term health of society, particularly when it came to future pandemic preparedness and the crypto push as a less important side issue. Bankman-Fried, in particular, pushed tens of millions into the Protect Our Future PAC, focused on pandemic preparedness. “If this is a weird crypto play, I certainly have not been informed about it,” his brother, who ran the Bankman-Fried-funded nonprofit Guarding Against Pandemics, said in May.
But perhaps Gabe just didn’t know. In a series of DMs that he no doubt now regrets, Bankman-Fried told Vox’s Kelsey Piper last week that his pitch for “good” crypto regulations was “just PR” and that regulators “make everything worse.” (“Fuck regulators,” he said more pointedly). Later, when asked if the “ethics stuff” was “mostly a front,” he said yes, then added, “I mean that’s not all of it but it’s a lot.” Two days later, Reuters reported that FTX tried to increase its regulatory presence “as a way of luring new capital from major investors,” according to documents the news company reviewed.
Now, the tides appear to have turned, as the man who proclaimed that he started FTX because of fears about customer safety and systemic risk leaves behind an “unprecedented” mess, in the words of the man who wound down Enron (and is now charged with doing the same for the bankrupt FTX).
Money isn’t everything in Washington, but it’s a lot of it, and Bankman-Fried now has a whole lot less. No wonder that both chambers of Congress are preparing to hold hearings regarding the disaster that is his company. Lobbyists and trade groups are quitting on him and his company, and senators, hoping to rid themselves of his stench, are diverting his donations to charities and nonprofits.
Bankman-Fried’s reputation is likely ruined. But for a moment there, he “was really right on the cusp of getting everything he wanted,” said Kelleher. “It was only, I really think, an accident of timing and luck” that he didn’t, added Kelleher. In any case, he leaves behind the sort of Washington playbook worth studying.
“Sam Bankman-Fried probably did a lot wrong in business, but did a lot right in Washington,” said Hauser. “I suspect other people will learn from it.”