As disgraced cryptocurrency exchange founder Sam Bankman-Fried faces charges he defrauded investors of billions of dollars, his wide-ranging political campaign contributions to politicians, including Chicago mayoral candidate Jesús “Chuy” Garcia, are drawing questions and criticism.
Bankman-Fried on Thursday was released on a $250 million bond package while he awaits trial following the collapse of the FTX crypto exchange. And the widening scandal has politicians across the country scrambling to explain their connections to the FTX exchange founder.
Garcia, a congressman from the Southwest Side, has garnered the most attention in Illinois for being the beneficiary of Bankman-Fried’s political largesse, though he isn’t the only one. Others include two newly elected Democratic members of Congress, Jonathan Jackson of Chicago and Nikki Budzinski of Springfield, as well as Chicago Ald. Gilbert Villegas, 36th, who ran for Congress but lost in the Democratic primary.
But as Garcia is making his second bid for Chicago mayor and received significant support for his campaign, some political opponents have seized on the contributions to try to tie Garcia to the scandal-plagued onetime wunderkind.
Garcia’s congressional campaign fund got a $2,900 direct contribution from Bankman-Fried in June, according to the Federal Election Commission reports, and a political action committee associated with Bankman-Fried spent $151,420 on mailers promoting Garcia’s candidacy in the 4th Congressional District, even though he was unopposed in the Democratic primary.
Garcia, who sits on the House Financial Services Committee that handles proposals to regulate cryptocurrency, won the November general election with about 68% of the vote over two challengers. Shortly thereafter, he announced he was running for mayor.
Since FTX collapsed in November and Bankman-Fried resigned, Garcia has worked to distance himself from Bankman-Fried.
Garcia mayoral campaign spokesman Antoine Givens said Garcia donated the $2,900 to a charity and “was one of the first members of Congress” to do so. Givens also said that as a congressman Garcia has been no friend to crypto executives who hope legislators will take a hands-off approach to the industry.
“Congressman García has been a strong advocate for the regulation of speculative industries, including the crypto industry,” he said.
The political contributions tied to Bankman-Fried have taken on added significance because they have become part of the case against him.
While the Securities and Exchange Commission alleges Bankman-Fried concealed from FTX investors that he was transferring their money to his privately held hedge fund for undisclosed investments and lavish real estate purchases, the money also went for large political donations, authorities allege.
A federal indictment against Bankman-Fried alleges he broke campaign finance laws “involving the making, receiving and reporting of a contribution, donation, or expenditure …” and that he violated prohibitions on corporate contributions.
Federal investigators have not said political candidates violated campaign laws as part of the alleged Bankman-Fried scheme, but The New York Times reported last week that federal prosecutors are seeking information from Democrats and Republicans about contributions they got from Bankman-Fried and people and companies associated with him.
The former FTX head has said he also gave large sums to Republican candidates, but that he did so mostly anonymously using so-called dark money political funds that aren’t publicly disclosed.
Garcia had not been contacted by federal prosecutors, Givens said.
While Garcia’s campaign said it donated Bankman-Fried’s direct $2,900 contribution, it can’t do the same with the $151,420 spending by the PAC, Protect Our Future, which was not directly contributed to Garcia’s campaign but was rather a separate, independent expenditure.
Givens pointed to rules prohibiting such committees from coordinating with candidates. “By definition, the congressman had no involvement in any independent expenditure campaign,” he said.
Mayor Lori Lightfoot, who is facing a reelection challenge from Garcia and more than a half-dozen others, has nonetheless pounced on the connection between Garcia and Bankman-Fried, who is often known by his initials “SBF.”
On Thursday, her campaign raised questions about the nearly $200,000 spent on Garcia’s behalf and said, “it’s already getting tough to keep up with Garcia’s controversial ties to the now-indicted SBF — and Garcia isn’t providing any clarity as he continues to dodge Chicagoans’ important questions.”
Earlier in the week, her campaign released a statement quoting her ally, state Rep. Kelly Cassidy, asking “What were Bankman-Fried’s motives for spending so much on Rep. Garcia’s reelection, and what did Garcia promise in return — particularly when he was running unopposed at the time?”
Lightfoot herself officially welcomed FTX to Chicago in May, when the company opened a headquarters in the Fulton Market neighborhood. Bankman-Fried announced four months later that the headquarters would move to Miami.
Another mayoral contender, state Rep. Kam Buckner, questioned how a “self-proclaimed reformer” like Garcia could “accept special interest support from a crypto billionaire whose industry’s future rests on members of Congress?”
Garcia is hardly the only politicians in Illinois who was a beneficiary of campaign funds tied to Bankman-Fried.
Democratic Illinois Sen. Dick Durbin received $2,900 from Bankman-Fried in March, according to the FEC. Durbin said he would donate the money to charity.
Jackson, who emerged victorious from a hard-fought Democratic primary to succeed Bobby Rush in the U.S. House representing a district stretching from the South Side deep into the south suburbs, saw the Protect Our Future PAC spend $500,065 on TV ads for his campaign in a payment reported to the FEC in June.
Jackson won the fall general election with about 66% of the vote.
The Jackson campaign did not respond to questions about whether he plans to take steps to address that spending on his behalf in light of the accusations against Bankman-Fried.
Also, according to FEC records, Bankman-Fried contributed $2,900 to U.S. Rep.-elect Nikki Budzinski, who won the Democratic primary for the new downstate 13th Congressional District. In November, Budzinski beat Republican Regan Deering of Decatur in the general election. Budzinski has donated that money to local charities, according to spokesman Philip Shelly.
Protect Our Future also contributed $263,453 in June to pay for TV ads to support Budzinski, according to the FEC.
Budzinski has not been contacted by federal prosecutors, Shelly said.
And Gilbert Villegas got $2,900 directly from Bankman-Fried during his unsuccessful run for Congress representing the 3rd District on the Northwest Side and northwest suburbs. Bankman-Fried’s donation was unsolicited, Villegas said, one of many payments from “people around the country.” Villegas said he had not been contacted about the donation by federal prosecutors.
“As soon as this guy got in trouble, we donated it to Planned Parenthood of Illinois,” Villegas said.
jebyrne@chicagotribune.com
