By TIMOTHY SCHUMANN
THE CENTER SQUARE CONTRIBUTOR
(The Center Square) – The new executive of failed cryptocurrency exchange FTX has a message for politicians or charities who received money from former CEO Samuel Bankman-Fried: give it back, or we’ll take it back with interest.
The list of recipients of Mr. Bankman-Fried’s political spending is a long one and includes members of Congress from Washington state, Sen. Patty Murray, D-Bothell, and Sen. Kim Schrier, D-Sammamish.
Campaign finance records show Sen. Murray and Sen. Schrier received donations to their successful re-election campaigns from Mr. Bankman-Fried of $5,800 and $2,900 respectively. Spokespersons for both campaigns told the Seattle Times that they were planning to donate the money to charity.
Under the guidance of new executive John Jay Ray III, an attorney and insolvency specialist who managed to successfully claw back a great deal of money after Enron imploded in the early 00s, FTX has said that’s not good enough.
“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,” the company said in a Dec. 19 statement.
It further warned, “To the extent such payments are not returned voluntarily, the FTX Debtors intend to commence actions before the Bankruptcy Court to require the return of such payments, with interest accruing from the date any action is commenced.”
FTX founder and former billionaire Mr. Bankman-Fried is currently under house arrest at his parents’ home, awaiting trial on a $250 million dollar bond, one of the largest in U.S. history.
The legal issue for entities that Mr. Bankman-Fried donated money to turns on whether or not he actually had the money to make those donations without dipping into the company till.
Federal prosecutors allege Mr. Bankman-Fried embezzled client funds from his cryptocurrency exchange to use for his own ends, including donations to Sen. Murray, Sen. Schrier and hundreds of others.
Before the FTX creditors can legally claw back some or all of that money, either the government will have to prove its case in court or Mr. Bankman-Fried will have to plead guilty.
Mr. Ray took the position of executive on Nov. 11 and immediately took the company into bankruptcy.
“Never in my career have I seen such an utter failure of corporate controls at every level of an organization, from the lack of financial statements to a complete failure of any internal controls or governance whatsoever,” he said in a Dec. 13 statement to the House Financial Services Committee.
In the wake of the Enron collapse, Mr. Ray returned about 52 cents on the dollar to all of the company’s creditors, or $828.9 million, according to a Wall Street Journal report.
As of mid-December, Mr. Ray told the Financial Services Committee that he had “secured more than $1 billion of digital assets to protect against the risk of theft or unauthorized transfers.”