Sam Bankman-Fried trafficked in ubiquity. The CEO of FTX began infiltrating Washington, D.C., last year, selling cryptocurrency as an answer to financial problems in the U.S. And he never seemed to leave.
Last month, in the span of a few days, the man known as SBF appeared at no fewer than three major Washington events, with lawmakers, prominent bankers and financial academics in the audience. In the early days, his cheerful digital campaign was met with confusion and some low-grade hostility, but in recent months, his relentlessness was starting to bear fruit.
He spoke at conferences, testified on Capitol Hill, championed crypto legislation and – possibly most importantly – became one of the highest-spending individuals in U.S. campaign finance. The genial, mysterious “billionaire” from the digital assets world, who said he wanted his industry to be regulated as soon as possible, had become the leading voice for crypto in Washington. But in a single turbulent Tuesday, that status evaporated as his global crypto behemoth admitted it was in a dire liquidity crisis and had agreed to sell itself.
The smoke hasn’t cleared, and the deal with Binance evaporated, but his rapid D.C. ascent and crash has already sent shockwaves through the crypto community that’s been growing in the U.S. capital.
CFTC Commissioner Caroline Pham is among the many regulators who’ve met with Bankman-Fried this year. She’s been watching with everybody else what’s happened this week and said she can’t comment on an individual company. But she had a general message in response to the industry turmoil:
"If risk management is not at the core of your business, you might not have a business for long," she said. “It’s time for regulators to make sure that crypto is held to the same standards as other financial firms.”
Bankman-Fried said at an event last month that he’s been in Washington at least once a month and spends “half [his] time on regulatory matters.” Of that, most of it is in the U.S., he said. “It’s all happening at once,” he said of the policy efforts for which he’s been meeting with lawmakers and regulatory agencies.
"He spent a lot of time on Capitol Hill in a really important role, which was educating Congress on these very technical and – to some extent – new topics," Rep. Jim Himes (D-Conn.) told CoinDesk TV on Wednesday.
And it was working. He publicly lobbied for a new bill this year in the Senate Agriculture Committee that would have given the Commodity Futures Trading Commission new powers to police digital assets trading.
“I think these developments strike a blow for the credibility of the industry in Washington, and for calls to advance regulatory legislation quickly in the name of fostering crypto innovation,” said Mark Hays, a policy analyst for Americans for Financial Reform, in an email. He said policymakers shouldn’t be “hitching their wagon to a wealthy, charismatic founder or donor who too often turns out to be not quite what he/she promises to be.”
So, will U.S. oversight be slowed and crypto’s reputation be damaged by SBF’s missteps?
“The Wild West, indeed,” suggested Paul McCaffery, the head of alternative capital sales at investment bank Keefe, Bruyette & Woods, in a research note on Wednesday. He wrote that it’s “not a good look” for the industry and that many politicians “will get scared off.”
Perianne Boring, who leads the Chamber of Digital Commerce that advocates for pro-crypto policies in Washington, said this drama effectively highlights a couple of things: the “importance of getting policy right,” and the “unique global nature of crypto.”
“It may be that policymakers will want to take a wait-and-see approach,” she said. “There is still a lot of information to be made public.”
‘FTX is fine’
Bankman-Fried observers in Washington marveled at the clearly intelligent, youthful CEO, seeming to brandish his shorts and a T-shirt as a rejection of the capital’s formal traditions. His self-deprecating remarks and casual manner had a disarming effect for the crowds that came to see him.
But if he was trying to build a nothing-to-hide reputation, his tweets this week may have jeopardized it – and will likely be the subject of close scrutiny.
He tweeted that his company “has enough to cover all client holdings.” He wrote, “FTX is fine. Assets are fine.” Then he deleted the tweets, right after FTX’s move to seek an emergency rescue.
The future for Bankman-Fried’s FTX US, which wasn’t initially meant to be part of a sale, is uncertain, so it’s hard to say whether a CEO Bankman-Fried will return to lobby Washington. Also unknown: the future of his campaign giving, where tens of millions donated to congressional candidates made him the fourth largest political donor during the midterm primaries this year. (Though his personal fortune has waned considerably this week.)
The Democrats he supported were looking forward to him being a major source of campaign cash going forward. Bankman-Fried had become a patron beyond his narrow crypto interests when he threw a political curve ball, dismissing whether candidates had an interest in his industry and instead supporting them based on their ability to prevent the next pandemic. Some of the politicians he supported even had negative positions on the digital assets movement, to the frustration of industry efforts pushing for pro-crypto candidates.
In the vein of his famous philanthropic streak – “effective altruism” – he wanted to spend his money to help “people who will make sure to follow through on common sense things to try to not have what happened to us over the last few years happen again,” he said at a recent event. With reports that his company ran into a shortfall in the billions of dollars, his finances may no longer allow him to be the same political force.
No other crypto executive has so far drawn the same kind of star power in Washington as the bushy-haired CEO.
FTX US is one of the nine member companies behind the Crypto Council for Innovation, whose head of government affairs, Brett Quick, said she didn’t have special insight into SBF’s relationships on Capitol Hill.
“When we see something like this, it really just bolsters support for putting in a regulatory framework,” she said in an interview. “I don’t think that changes at all.”
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