The Politics of Crypto Crime: Following the Money
Cash, crypto and connections
A cautionary tale of influence-peddling in the digital age
IN THE TANGLED aftermath of the FTX cryptocurrency collapse, a striking pattern has emerged in the dispensation of justice: those who cooperated early with prosecutors have been treated with remarkable leniency. Sam Bankman-Fried, the dishevelled founder of FTX, received 35 years in prison, whilst his associates who assisted prosecutors have largely avoided big-time incarceration. True, Caroline Ellison, his sometime girlfriend and chief executive of Alameda Research, received a two years minimum security residence in Connecticut despite prosecutors recommending no jail time.
More striking still is the case of Nishad Singh, whom The New York Times described as a "top advisor" who helped siphon $8 billion from customer accounts. Mr Singh, who distributed millions in political donations to left-leaning organizations, walked free with only supervised release.
Yet these disparate sentences tell only part of the story. Behind the headlines about financial fraud lies a more complex tale—one of political influence and strategic prosecution. The decision to focus on financial crimes while dropping political corruption charges has left a trail of tantalizing clues about a broader campaign of influence-peddling that may never be fully illuminated.
The prosecution's 116-page sentencing memorandum against Mr Bankman-Fried reveals a sophisticated operation to purchase influence around the world. The scams, described by prosecutors as "exceedingly complex, reflecting meticulous orchestration, sophisticated maneuvering and cunning deception," presents tantalizing hints about the extent crypto was used to play footsie with pols and players around the world.
A Tale of Three Countries
The China gambit
In China, the story begins with frozen accounts worth $1 billion belonging to Alameda Research. After attempts to circumvent the freeze—including the creative use of Thai nationals' identities—Mr Bankman-Fried resorted to more direct methods. A cryptocurrency payment of $40m to an anonymous wallet mysteriously preceded the accounts' unfreezing. A further $100m followed to "complete the bribe", though prosecutors remain silent on the recipients' identities.
Caribbean considerations
The Bahamas presents an equally murky picture. As FTX collapsed, Mr Bankman-Fried permitted withdrawals exclusively for Bahamians and company insiders, explicitly informing the nation's Attorney-General of this preferential treatment. Curiously, Bahamian authorities later excluded political donation charges from his extradition agreement—charges that American prosecutors subsequently dropped.
American influence
In America, prosecutors describe Mr Bankman-Fried's political donations as the largest campaign finance fraud in US history. Yet they demur on specifying the partisan distribution of funds or their impact on electoral outcomes. More intriguingly, they remain silent on whether these contributions yielded any regulatory advantages.
Patterns in the shadows
For those seeking to understand the full scope of FTX's political machinations, Churchill's description of Russia—"a riddle, wrapped in a mystery, inside an enigma"—proves apt. Like a Russian matryoshka doll, each layer of the story conceals another. In Mr Bankman-Fried's personal notes, prosecutors found a list of "people who might be helpful," including a Democrat senator. Elsewhere, the Federal materials record that a political organization bearing the name of that Senator returned FTX-linked contributions.
A study in contrasts
The prosecutors' carefully worded submissions present a study in contrast. In China, the narrative is unambiguous: cryptocurrency payments achieved their intended result, with frozen accounts swiftly unfrozen after $140m changed digital hands. Yet when it comes to The Bahamas and America, prosecutorial silence screams for attention. Did preferential treatment of Bahamian withdrawals yield the desired limitations on extradition? Did the largest campaign finance scheme in American history secure any advantages?
A legacy of shadows
The decision to drop the political corruption charges—announced in a letter to the judge just before the Christmas weekend of 2022, when public attention would be minimal—ensured that crucial questions would never face judicial scrutiny. Unlike the Chinese bribe, whose efficacy is documented in prosecutorial filings, the full scope and success of FTX's American influence campaign remains shrouded in official silence. The public may never know which doors opened, which doors were closed or which investigations stalled.
The surface truth is early cooperation and plea deals with the Feds has proven a surer path to leniency than political connections: Mr Singh and Ms Ellison grasped this truth early. Yet their testimony, necessarily limited to what was relevant to the charges SBF faced, focused on financial fraud with only tangential references to the deeper story of influence-peddling. In the end, the prosecution's strategic choices may have secured convictions while keeping the most troubling aspects of the FTX saga safely in the shadows.
Further reading
Enthusiasts of cryptocurrency crime fiction will enjoy "Double Track", a novel by the author of this article. It presents a fictional account of a different kind of meticulously planned crypto crime!
Here’s the link to the Amazon page
https://www.amazon.com/dp/B0CN5Z4FJH?ref_=cm_sw_r_cp_ud_dp_0WJ75JNQ45V4YEHXBTXM
Sources
This article draws primarily on three documents:
The government's sentencing memorandum (March 15th, 2024):
https://storage.courtlistener.com/recap/gov.uscourts.nysd.590940/gov.uscourts.nysd.590940.410.0_2.pdf
Time magazine's investigation into FTX's political donations (December 2023):
https://time.com/6241262/sam-bankman-fried-political-donations/
The New York Times' reporting on Mr Singh's sentencing (March 2024):
https://www.nytimes.com/2024/10/30/technology/nishad-singh-ftx-executive-sentencing.html