Democratic Party Has a Crypto Issue

On May 11, 2021, Sam Bankman-Fried, cofounder and CEO of FTX, will be in Hong Kong, China. (Bloomberg’s Lam Yik via Getty Images)

Sam Bankman-Fried, the Democratic Party’s second-largest donor, had cause for celebration on election night, November 8, when his chosen party exceeded expectations. Despite being only 30 years old, Bankman-Fried (also known as SBF) had founded FTX, a crypto currency exchange with its headquarters in the Bahamas, and as a result had earned a net worth that is thought to be around $24 billion. He became an immediate power player thanks to his fortune. SBF had given the Democrats in the midterm elections at least $40 million of his own money. Colleagues at FTX also spent $70 million lobbying Washington for their preferred causes, such as strengthening pandemic prevention and deregulating cryptocurrency.

SBF was a natural fit for the centrist Democrats who were hungry to regain control of the party in Joe Biden’s Washington thanks to his combination of computer expertise, extreme wealth, youth, and love of technocratic solutions. It was appropriate that Bill Clinton and Tony Blair, two of the luminaries of a previous centrism, travelled to the Bahamas in April for a conference put on by FTX. In pictures from the conference, ageing neoliberal politicians can be seen admiringly observing the crypto wunderkind while clad in shorts, a T-shirt, and sneakers like a beach bum. The former world leaders’ attire revealed a story: whereas the young millionaire was confident enough to defy conventions, the former world leaders were dressed to impress. Politicians served as courtiers to the plutocrat, who ruled.

Right-wing populism has received a great gift from this image. The centrists who support SBF, who accepted his questionable donations, sanitised his reputation, and disregarded all the clear warning flags, have given radicals a tremendous gift.pic.twitter.com/bQMmO1BVgs

—Jeet Heer (@HeerJeet) November 17, 2022

SBF, a rising star among Democrats, should be proud of the way he was transforming a party that appeared poised to win the White House and the Senate. According to Alex Seitz-Wald of NBC, SBF had contributed funds to the “House Majority PAC, which took $6 million; Senate Majority PAC, which took $1 million; the Democratic National Committee, which took over $900,000; the Democratic Congressional Campaign Committee, which took $250,000; and the Democratic Senatorial Campaign Committee, which took over $66,000.” In interviews, he said that he planned to keep spending money on elections in the future. He promised to spend “north of $100 million” on the 2024 presidential race.

These numbers will make candidates and political consultants drool. It was not to be, though. The day after the 2022 midterm elections, financial reports showed that FTX might have done some questionable things, leading to a cash shortage. By November 11, SBF’s alleged billions had vanished, and FTX had filed for bankruptcy. Bloomberg claimed that SBF himself lacked any financial wealth. Press stories started calling FTX a pure Ponzi scheme and maybe the biggest scam. There are numerous rumors about the criminal justice system.

Present problem

What can we make of SBF’s swift ascent and equally quick descent? It’s a story that goes way beyond what would typically be considered business news in terms of how it affects politics. Right-wing Republicans are already working hard to turn SBF into a meme as proof of Democratic Party graft. The cryptocurrency market as a whole is unstable, and the end of FTX may just be the start of a bigger crash. Even though Republicans are even more likely than Democrats to accept cryptocurrency, if that happens, the popularity of SBF will become a political tool.

Democrats’ issue is an ideological disparity. The Republicans’ worldview of business dominance makes it consistent for them to accept cryptocurrency while calling for the industry to remain uncontrolled. Democrats, though, at least acknowledge that unbridled capitalism needs to be regulated. Democrats that accept cryptocurrency donations are vulnerable to charges of hypocrisy and, worse, malfeasance.

Democrats who support cryptocurrency include Rep. Sean Maloney, who just lost his seat in the midterm elections, Sen. Kirsten Gillibrand, and New York City Mayor Eric Adams. When Gillibrand appeared on the CNBC program Squawk Box in June, she promoted cryptocurrency as a safe place for people to put some of their retirement funds. In a prank, Adams accepted a portion of his pay in bitcoin in November 2021.

According to The Lever, “Bankman-Fried and FTX assisted in establishing the Association for Digital Asset Market (ADAM), a crypto lobbying group that tried to stymie the Securities and Exchange Commission’s aggressive new leadership.” Instead of using a bill backed by Senators Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.), Adam tried to make the Commodities Futures Trading Commission (CFTC), which is much smaller and has less money, its only regulator.

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Politicians, policy experts, and strategists were delighted to serve SBF. It’s important to note the political bias in favor of SFB’s ideological allies. According to Alex Seitz-Wald, “Bankman-money Fried’s also made sure to support candidates and causes in both wings of both parties, for example, by keeping progressives like Sean McElwee, the founder of Data for Progress, while joining forces with organizations like AIPAC to support moderates as they pounded progressives with hard-hitting TV ads in Democratic primaries.” However, this skews the picture. McElwee has worked for leftist candidates, although he is primarily a hired gun.

To understand SBF’s philosophy, it’s essential to think about the intellectuals he’s linked to, especially the journalist Matthew Yglesias and the political advisor David Shor. This group describes itself as “populists” quite frequently. They think the Democratic Party has embraced identity politics and phrases like “defund the police” much too quickly. This group advises Democrats to tone down their stance on social issues to win over more moderate voters.

Given the intellectuals he admires, it’s not a surprise that SBF has been able to collaborate closely with AIPAC to try to defeat Democrats like Nina Turner (who lost) and Andrea Salinas (who won) in the most recent round of primary elections, with varying degrees of success.

Yglesias has written two intriguing quasi-apologies explaining why SBF has good qualities in his substack “Slow Boring.” Yglesias stated in May that SBF was driven by charitable generosity rather than greed. According to Yglesias, SBF is a supporter of “effective altruism” (EA), a school of utilitarianism that promotes “giving by earning.” The theory says that the best way to make the world a better place is to get a lot of money, which you can use to help with critical long-term projects that politicians usually ignore. People who believe in practical altruism support things like preparing for pandemics, asteroids, and threats from artificial intelligence because they think there is a real chance that one day sentient computers will try to destroy humanity.

Yglesias emphasizes biography a lot. He writes, “A famous consequentialist moral thinker brought up SBF.” This is a weak justification. It’s far from certain that you are automatically ethical just because your father is an ethics professor at Stanford University. “When you consider SBF’s lifelong investment in consequentialist and EA ideas (he was blogging about utilitarianism as a college student), it becomes clear that far from SBF’s political spending being a front for cryptocurrency, cryptocurrency businesses exist to finance effective altruism, Yglesias continues.

SBF doesn’t come off as the lofty moralist that Yglesias described in an interview with Kelsey Piper of Vox conducted after his firm failed. SBF acknowledges that his appeal for “excellent” rules was “simply PR” and that, in reality, he thought regulators were “fucks.” “If “the moral thing” was “primarily a facade,” Piper questioned. Yes, SBF acknowledges That’s not *all* of it, after all. It’s a lot, though. Then Piper questioned whether SBF ethics were simply “a game with winners and losers.” “Ya,” the former billionaire replied. Hehe.…

To some extent, it is the stuff that reputations are made of. For people who are screwed by it, I feel horrible. (SBF’s replies mainly took the form of semiliterate, unpunctuated DMs. To make them easier to read, I tidied them up.)

Matthew Yglesias wrote an article on Thursday that revisited the SBF query. He acknowledges that SBF might have harmed the causes that the purported philanthropist supported. However, Yglesias keeps making an effort to defend SBF’s activities. Yglesias asserts:

He donated tens of millions of dollars to remove Donald Trump from office (and also quite a bit to Democrats in the 2022 cycle). His preferred cause won in this instance. But it won by a slim margin. Any political victory results from many people working together, and no one is responsible. But in politics, money does matter, and several of these contests—most notably the 2020 electoral college—were extremely close. Without SBF’s funding, it’s conceivable that Trump would still hold the presidency.

This, like most of Yglesias’ writing, lacks coherence. How can you both assert that Joe Biden’s success in the 2020 election was “no one person’s fault” (which is accurate) and that SBF’s funding made the difference between winning and losing? In any case, it is projected that the entire cost of the 2020 election will be $14 billion. In other words, the scale of the spending by millions of others eclipsed the tens of millions SBF donated. Ironically, saying that SBF’s contributions aided Biden’s victory will only feed right-wing conspiracy fantasies.

Yglesias maintains that SBF donated funds to “worthy” causes. But is it the case? One reason is that, according to SBF, he spent money to gain the power to fight against regulation. Pandemic preparedness is a favourite SBF cause. The Bankman-Friends family foundation gave $5 million to ProPublica so that they could make a report on the lab-leak idea. The information was heavily criticized because it was full of bigotry and wrong translations.

The notion that the wealthy know better underlies the ethos of effective charity. People think those with the most money look out for everyone’s best interests.

You would need experience with human history to understand what’s wrong with this line of reasoning. Sadly, Bankman-Fried has a fierce anti-intellectual stance. He stated, “I think if you published a book, you fucked up, and it should have been a six-paragraph blog post,” in an interview for Sequoia Capital’s website.

The famous Marxist historian Perry Anderson has called utilitarianism “a militant, single-minded dogma of capital accumulation and cultural nihilism.” That was unjust to John Stuart Mill and Jeremy Bentham, without a doubt. But Sam Bankman-Fried fits the bill nicely.

Unfortunately, moderate Democrats have chosen to support this alliance of belligerent idiocy and greed. By doing this, they’ve effectively given the Republicans—especially the far right—a tremendous gift. If they believe what Yglesias says about effective altruism and consequentialism, they should consider how their corrupt politics will affect people in the long run.