FTX Collapse

THOMAS MCARDLE was a White House speechwriter for President George W. Bush and writes for IssuesInsights.com. Thomas McArdle

A Stolen Senate

Counterfeit cash financed Democrats in the midterms

Counterfeit dollars just used by Democrats to restrain the widely predicted Republican “red wave” was wealth that existed within cyberspace, the result of bamboozling investors perpetrated by a now-washed-up tycoon in his 20s whose treasure chest ended up consisting of play money. If you thought Republicans were the party of big business and the heartless rich, you might be wondering how Democrats managed to outspend Republicans in key races this year, such as John Fetterman raking in nearly $48 million in his Pennsylvania U.S. Senate campaign, while the Republican opponent he defeated, Mehmet Oz, took in only about $12 million, (augmented by loaning himself $21 million). Or incumbent New Hampshire U.S. Sen. Maggie Hassan being reelected after raising $38 million, while her Republican challenger, Trump-backed retired Gen. Don Bolduc, pulled in a mere $2.2. million. A big part of the answer is that Democrats are now the party of the snake oil mogul.

Despite his unprepossessing image, often seen in a T-shirt and shorts, Sam Bankman-Fried is an MIT physics grad who was a billionaire before age 30. Defying the usual American entrepreneurial norms of familial stability and respect for the law, Bankman-Fried headquartered his cash cow in the tax haven of the Bahamas and, if we’re to believe reports, enlisted a board of senior executives/roommates who doubled as his own polyamorous commune.

Before his financial orgy came crashing to an end this month and more than $2 billion in FTX clients’ investments dissolved, Bankman-Fried had handed Joe Biden $10 million during the 2020 presidential election and gave Democrats more than $40 million in this year’s midterms, buying the party a majority in the U.S. Senate in the next Congress. He was the second-biggest donor to the party’s campaigns, behind only Hungarian-born leftist billionaire currency manipulator George Soros.

In dissecting FTX’s collapse, it’s crucial to appreciate what too few people—woefully uneducated in economic truths thanks to a union-dominated public school system—know about company valuation, that what observers accept to be a firm’s worth is always dependent on human judgment that presumes trustworthy conduct.

In the case of FTX, however, Bankman-Fried likely didn’t need a crystal ball to see that what he and his Caribbean playmates were presiding over was near to doom. John Ray III, appointed to replace Bankman-Fried as CEO during bankruptcy and previously the overseer of the Enron clean-up, remarked that he had never seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”

Perhaps only a one-time adolescent math whiz absent of moral scruples could possess the technical skills and lack of ethics required to pull off shifting his customers’ money back and forth between various affiliated business entities in a shell game that included using new loans to pay interest on old loans in order to present the fiction of liquidity, with celebrities such as quarterback Tom Brady and TV actor Larry David enlisted to enhance FTX’s public image. Bankman-Fried even got FTX’s logo on the uniforms of all of Major League Baseball’s umpires, juxtaposing the Nike swoosh adorning those of the players. After flying so high, the firm—once thought to be worth $32 billion—is now under federal investigation for securities violations.

But the writing was on the wall long ago for the Biden administration to see. Crypto has been losing a lot of people money in recent months, yet Bankman-Fried was mysteriously buying rival crypto companies such as BlockFi and Voyager Digital as the Securities and Exchange Commission apparently sat idly by.

Add to all this the fact that Bankman-Fried’s parents are Democratic Party operatives—his father, Joseph Bankman, having helped Sen. Elizabeth Warren (D-Mass.) draft tax legislation, his mother leading an outfit called “Mind The Gap” that connects donors with Democrat candidates and causes, and his brother Gabe founding a political action committee that uses fear of future pandemics to funnel cash to Democrats.

Compare the fraudulent money FTX loaded up Democrats with to Elizabeth Holmes, the disgraced CEO of multi-billion-dollar blood-testing scam firm Theranos, hosting a fundraiser for Hillary Clinton’s presidential campaign at Theranos’s Palo Alto headquarters in the spring of 2016, dangling a chance for face time with Chelsea Clinton for those willing to cough up $2,700.

In the cases of both FTX and Theranos, unwitting investors’ cash didn’t all go down the black hole of Bankman-Fried’s and Holmes’ lies; they financed left-wing candidates and causes that the owners of that money didn’t approve—and no doubt many oppose. And Democrats seem none too happy to take money invested under false pretenses.

Thus, the left has found another way to use capitalism in its war against economic freedom—and every other freedom.