Left: Republican presidential nominee former President Donald Trump speaks about the tax code and manufacturing at the Johnny Mercer Theatre Civic Center, Tuesday, Sept. 24, 2024, in Savannah, Ga. (AP Photo/Evan Vucci). Right: Right: Democratic presidential nominee Vice President Kamala Harris speaks during a campaign rally at Bojangles Coliseum, in Charlotte, N.C., Thursday, Sept. 12, 2024 (AP Photo/Jacquelyn Martin).
Back in Holland in the 1600s the market went wild for tulips — and then crashed in a spectacular fashion. As Syracuse law professor Christian Day wrote, “when the markets crashed … society often rejoiced in schadenfreude.”
Today the craze is crypto. And one of the reasons to take this more seriously than Tulip Mania is that cryptocurrency companies — and their evangelistic boosters, often referred to as “crypto bros” — are spending big money in the 2024 elections to influence American voters.
As I write about in my book “Corporatocracy,” cryptocurrency spending in American elections isn’t completely novel. Back in 2020, the largest single corporate donation to a super PAC was a $5 million donation from a company called Alameda Research, a cryptocurrency hedge fund run by the then-wunderkind Sam Bankman-Fried, better known as SBF.
At the time I had never heard of Alameda. That would certainly change after his crypto currency FTX imploded in late 2022. It turned out that these companies (Alameda and FTX) were joined at the hip, with money flowing back and forth between them through a back door, and that FTX was acting like a bank without a banking license in any of the countries where it operated — including the U.S.
“We know that FTX’s affiliated hedge fund Alameda Research made large bets that fared poorly, leaving Alameda with a dubious balance sheet (its largest asset was its holdings of FTT tokens),” law professor Hillary Allen said in written testimony to the Senate in December 2022. “We know that assets belonging to FTX’s customers were lent to Alameda, in exchange for FTT tokens. We know that FTX created these FTT tokens out of nothing … When unlimited assets can be created, there are no limits on the creation of leverage, and when assets have no fundamentals and trade entirely on sentiment, traditional checks on fraud (like valuation methodologies and financial accounting) will inevitably break down.”
What I knew as a campaign finance expert was that FTX/Alameda spent big in the 2022 election. On the record, Sam Bankman-Fried was one of the biggest campaign spenders in the midterm election to the tune of $40 million, nearly all of it supporting Democratic candidates and causes. But that was just the money he spent on the record.
After he was arrested, SBF started talking to the press. He leaked the diary of his ex-girlfriend and co-defendant Caroline Ellison to the New York Times, and he told a reporter that he spent even more dark money in the election to support Republicans and Republican causes.
And the Justice Department didn’t just charge SBF with securities fraud — it also charged him with making $100 million in illegal campaign contributions. This was illegal because of an old law called the Tillman Act from 1907 which bars corporations from giving their treasury funds directly to federal candidates. SBF received a 25-year sentence for his securities fraud and other charges, and Ellison, whose testimony is seen as having helped prosecutors win a conviction, has been sentenced to two years behind bars.
In the end, SBF got off on a technicality for his campaign finance crimes because his extradition papers from the Bahamas didn’t mention campaign finance violations. The reason I think these crimes actually happened was because two of his fellow executives Ryan Salame and Nishad Singh pleaded guilty to help commit them. Salame got 90 months. Singh will be sentenced on Oct. 30.
So what is the tech industry up to in the 2024 election? A lot. For one, Peter Theil’s candidate of choice, JD Vance — who Theil bankrolled in the 2022 Ohio senatorial race — is the vice-presidential nominee for the Republican Party. Elon Musk has a new PAC called America PAC that reportedly has spent $30 million. There are several all-crypto PACs, including Protect Progress PAC which has spent over $8 million, and Defend American Jobs PAC which has spent over $50 million.
But the 800-pound gorilla is a PAC called Fairshake PAC, which has raised over $200 million and spent $100 million. Fairshake is funded by the Winklevoss twins, Mark Andreesen, and the company Coinbase. Company reps have already gloated about taking out Rep. Katie Porter, a Democrat, in her run for U.S. Senate in the Democratic primary, stating “Thank you, Katie Porter, for giving Fairshake credit for your loss.” (Protect Progress is the left-leaning affiliate of Fairshake and Defend American Jobs is its right-leaning affiliate.) Now Fairshake, through Defend American Jobs, has reportedly decided to spend $800,000 a day to target sitting Sen. Sherrod Brown, also a Democrat, who is the Chair of the Senate Banking Committee.
These crypto PACs are a little different than most corporate PACs: most corporate money goes to support Republicans exclusively, but these crypto PACs support pro-crypto candidates whether they are Republicans or Democrats.
Which then gets us to candidate Donald Trump’s obvious attempts to get this crypto money on his side. On Sept. 17, Trump and his sons launched a crypto exchange of their own, Trump has been selling NFTs, and he accepts Bitcoin donations. He has also said that he would pay the national debt with cryptocurrency and that poof it would be gone — an approach that has been met with derision, including from media commentator Nell Minow who wrote, “Why not just pay with Monopoly money?”
As someone who watched SBF act as the big spender in the political strip club only to end up in handcuffs and decades in prison, I can only hope the new crop of political crypto-spenders get better campaign finance legal advice than SBF did. It’s pretty easy to lawfully spend corporate money in American elections since the Supreme Court’s 2020 Citizens United ruling, which significantly lifted restrictions on political spending. But if the new wave of crypto high rollers are reckless, they could end up in an adjoining cell next to SBF, who was a billionaire before he reached the age of 30.
Meanwhile, take a look at the candidates that Fairshake is targeting: Candidates who want some reasonable regulations for this Wild West market are in their crosshairs, and their ads don’t mention crypto at all. Crypto arguably already took out progressives Cori Bush of Missouri and Jamaal Bowman of New York during the primaries. The balance of control of the House and Senate could well depend on this dump of crypto money into the 2024 election.
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