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Democratic reps deciding how to return tainted crypto donations

All of Nevada’s Democratic representatives received donations in the last campaign cycle from executives at FTX, a bankrupt, fraud-ridden cryptocurrency company in which the CEO is facing criminal fraud charges.

FTX, a crypto exchange, filed for bankruptcy in November, and its co-founder and CEO, Sam Bankman-Fried, was charged with money laundering, conspiracy to commit wire fraud and securities fraud, and conspiracy to avoid campaign finance regulations. Bankman-Fried was also one of the largest political donors in American politics, contributing more than $70 million to election campaigns in the last 20 months, according to Time.

One in three members of Congress — both Democrats and Republicans in the House and the Senate — received campaign funds from the company’s executives, according to CoinDesk, a media outlet focusing on cryptocurrency. After lawmakers received the donations, it was determined the funds sprang from the “colossal financial swindle,” according to CoinDesk. Many of them are figuring out how to shed the tarnished funds.

Nevada’s representatives receive funds

Nevada Sens. Catherine Cortez Masto and Jacky Rosen, and Reps. Dina Titus, Susie Lee and Steven Horsford all received donations from FTX executives.

Bankman-Fried donated $2,900 to Horsford in 2022, $780 to the Nevada State Democratic Party and $5,000 to the Blue Nevada PAC, which donated to a number of Democratic candidates in 2020 and 2022.

Former FTX executive Nishad T. Singh, who has not been charged in connection to the collapse, sent $5,000 to the Cortez Masto Victory 2022 committee, which is a joint fundraising account between the Cortez Masto’s campaign and Nevada Democratic Victory, which also set the funds aside. He also donated $5,800 to Lee and $2,900 to Horsford, according to campaign finance records.

Rosen and Titus each received $2,900 from a Nishad Singh who was not identified as an employee of FTX on the Federal Election Commission website but did have the same location listed on FEC as the Singh connected with FTX.

Former co-CEO of FTX Digital Markets Ryan Salame donated $2,900 to Adam Laxalt’s U.S. Senate campaign in September 2022.

Figuring out how to return funds

All of the campaigns of Nevada’s Democratic congressional delegation are awaiting instructions from the Department of Justice on what to do with the money, their campaigns told the Review-Journal.

“We intend to return the funds,” said Henry Novak, Lee’s campaign communications director, in an email. “We are awaiting guidance from the proper authorities on an appropriate system to return the funds or donate to a charity.”

“Titus for Congress is working to identify and set aside contributions from FTX executives and monitoring the legal process to determine next steps,” said Demi Falcon, deputy campaign manager for Titus, in an email. “To date we’ve only identified one contribution from an executive of the company.”

A spokesperson from Rosen’s campaign said the donation has been isolated from the rest of the donations until the Department of Justice offers guidance on how to return or donate the funds properly.

Refunding ‘unsavory’ money

Kenneth Miller, an associate professor in politics at UNLV who is an expert in campaign finance, said refunding donations is very common for campaigns. If someone “unsavory” donates to a campaign, it is fairly easy for the campaign to flag it and refund it, he said. But if there is a situation where the issue is discovered much later, refunding the money could be a little tricky since the candidate could have already spent the money, Miller said.

No Nevada representative has a negative campaign bank account balance, and would have enough money to return the funds.

In the case of FTX, the donations wouldn’t have raised any flags at the time they were received, Miller said. They are typical donations from executives who work at a company.

“If it turns out later that the funds that that executive had to make that donation may have been ill-gotten funds, that’s a tough spot for the campaign because if they refund it, they may be giving it back to someone who is in the middle of attempting to hide that money,” Miller said.

The best course for action for the campaigns is to just hold the money to the side, Miller said. With bankruptcy proceedings, courts are going to be looking to unwind as many transactions as they can, he said.

Ethical issues involved?

It is a common practice for executives of companies from all industries to contribute to political candidates’ campaigns, Miller said. One of the reasons why those donations are capped is that if the candidate can only get a certain amount, the donation is unlikely to be a corrupting influence, Miller said.

The donations from Bankman-Fried and other FTX executives came at a time when Congress began considering whether to regulate the cryptocurrency industry.

Bankman-Fried met regularly with lawmakers to discuss how the industry should be regulated, and he supported the Digital Commodities Consumer Protection Act of 2022, which would provide the Commodity Futures Trading Commission with authority to regulate the industry, according to the U. S. Senate Committee on Agriculture, Nutrition and Forestry. That legislation was introduced in August 2022 and was last discussed in September 2022 in the Committee on Banking, Housing, and Urban Affairs.

“It’s an interesting case because it’s an emergent industry,” Miller said. “So it’s one that is just entering the phase of getting some regulation, you know, it really isn’t regulated right now. And it looks like that’s about to start, so anyone involved in the blockchain or crypto or anything else is certainly going to want to be lobbying. So they certainly didn’t need this whole FTX thing blowing up on them.”

Contact Jessica Hill at jehill@reviewjournal.com. Follow @jess_hillyeah on Twitter.

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