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Speaker 1: This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,

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Speaker 1: and I'm Stacy Marie Ishmael, Managing editor of Crypto for

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Speaker 1: Bloomberg News. It's Monday, December five. The interplay of money

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Speaker 1: in politics in the US is real and well established,

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Speaker 1: and that includes when that money is either in the

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Speaker 1: form of crypto or comes from people who made their

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Speaker 1: fortunes in digital assets. The recently concluded US midterm elections

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Speaker 1: featured several candidates, including winning ones, whose campaigns were financed

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Speaker 1: in pot by crypto related donors and donations. Among those

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Speaker 1: donors Sam Bankman, Fried and Ryan Slamy of FTX, who

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Speaker 1: supported candidates on opposite ends of the political spectrum. To

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Speaker 1: be clear, the collapse of FTX has now led to

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Speaker 1: some of those same politicians and willmakers who received donations

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Speaker 1: from people like Bankman, Freed and Salami to attempt to

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Speaker 1: distance themselves entirely from their benefactors. For more in the

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Speaker 1: state of crypto money and politics in the US were

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Speaker 1: joined by Bloomberg reports. Alison Versprill Dam Big Ben Freed

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Speaker 1: gave about thirty nine million dollars during the mid terms,

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Speaker 1: almost all of it to Democrats, but Ryan gave you know,

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Speaker 1: about twenty three million dollars mostly to Republicans. And Bill Allison,

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Speaker 1: if you look at the numbers, I mean it's the

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Speaker 1: ft X donors. There were three big donors. They represented

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Speaker 1: about eight of everything that Crypto gave during the cycle. Bill,

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Speaker 1: welcome back to the podcast. Please reintroduce yourself to our audiences.

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Speaker 1: And Bill Allison, I cover politics and campaign finance and

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Speaker 1: Ali great to have you back in the show. I'm

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Speaker 1: Alison versus Brill and I cover crypto regulation. So you know,

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Speaker 1: between regulation and campaign finance and politics, some things have

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Speaker 1: been happening recently. I think it's fair to say, Bill,

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Speaker 1: for people who don't sort of obsessively follow the twist

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Speaker 1: and turns of either campaign finance or US politics, can

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Speaker 1: you just do a quick scene set of what's been

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Speaker 1: happening and what are the interconnections that you're observing between

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Speaker 1: crypto and US politics right now? Well, we just had

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Speaker 1: a midterm election, which is when um uh generally speaking,

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Speaker 1: the party that holds the White House loses a lot

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Speaker 1: of seats in Congress, and and this is to elect

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Speaker 1: basically the House and the Senate. UM. And we were

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Speaker 1: expecting and even you know, a lot of people predicting

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Speaker 1: a red way for Republicans to do really well, uh,

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Speaker 1: taking the House by wider margin, taking the Senate, and

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Speaker 1: instead we kind of had a status quo mid term. Um.

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Speaker 1: Democrats are right now even where they were in the Senate,

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Speaker 1: they may even pick up one more seat, and Republicans

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Speaker 1: have narrowly won the House. Now, what this means for

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Speaker 1: Washington is that we're going to be in a state

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Speaker 1: of gridlock. That's about where we are right now. And

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Speaker 1: you know, crypto kind of falls into the middle of

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Speaker 1: this because it is going to be an issue in

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Speaker 1: the next Congress given what's happened uh in uh with

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Speaker 1: f t X modern development. Since the stunning collapse of

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Speaker 1: former billionaire sen Bankman Freed's ft X empire last week,

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Speaker 1: one of the two biggest crypto exchanges in the world

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Speaker 1: is no more. There are now reports of unauthorized withdrawals

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Speaker 1: of funds after fd X and related entities were placed

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Speaker 1: in bankruptcy. And that's in't just that customers who are

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Speaker 1: not able to withdraw funds are unlike recover much. There

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Speaker 1: been accusations that it was misappropriating funds um using its

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Speaker 1: ties with Alameda Research, the trading arm that was also

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Speaker 1: founded by Sam Bankman Freed. And so we've definitely seen

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Speaker 1: UM failures across the board that's now rippling throughout the

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Speaker 1: crypto markets broadly UM, and we're starting to see other

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Speaker 1: companies suffer as well. So it's been a busy few

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Speaker 1: weeks in the in the crypto space, if that might

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Speaker 1: be the understatement of the century, as all of us

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Speaker 1: can confirm the level of business. And you know, Bill,

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Speaker 1: just to go back to your point, So the folks

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Speaker 1: who were elected or not elected in some cases roughly

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Speaker 1: what was the split in terms of either whether they

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Speaker 1: were kind of funded by crypto money or had taken

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Speaker 1: positions on crypto and one way or the other. So,

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Speaker 1: you know, crypto candidates did reasonably well. Um uh. You

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Speaker 1: know among the people that they backed were like, for example,

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Speaker 1: John Fetterman, the u AT candidate from Pennsylvania Democrat. He

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Speaker 1: won his election. UM. A lot of the people that

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Speaker 1: were backed by something called the g M I pack

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Speaker 1: and the web three Forward pack. House and Senate candidates

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Speaker 1: did well. So you know a lot of things broke

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Speaker 1: the way that the crypto industry wanted. But we're only

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Speaker 1: talking really about. You know, maybe you know fifteen twenty

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Speaker 1: people and in a Congress of you know, four thirty

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Speaker 1: five House members and a hundred senators. That's not definitive,

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Speaker 1: but this is sort of how things go on Washington,

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Speaker 1: that you kind of get the beachhead of people who

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Speaker 1: care about your issue and know about your industry, uh

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Speaker 1: in place, and then you know the ideas that then

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Speaker 1: you would work with the lobbyists where they would work

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Speaker 1: with the lobbyists and other folks who are part of

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Speaker 1: the government relations people of from that industry, who would

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Speaker 1: you know, basically spread the word to other members of

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Speaker 1: Congress and uh, you know. So so in that sense,

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Speaker 1: I mean, I think the crypto was able to do

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Speaker 1: what it wanted to. You know. One of the things

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Speaker 1: that has not necessarily been clear is that there is

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Speaker 1: like a unified crypto US as it were, right, And

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Speaker 1: a big criticism levied against Sam bank mun Freed is

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Speaker 1: that he had positioned himself as this person who was

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Speaker 1: advocating for certain types of regulation ostensibly on behalf of

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Speaker 1: the whole crypto industry, but in in terms of the

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Speaker 1: details in ways that would have benefited his particular slice

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Speaker 1: of that industry. In particular, are there other things that

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Speaker 1: over the course of the mid terms, or at least

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Speaker 1: the candidacy of the mid terms, that you saw sort

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Speaker 1: of emerges campaign issues. If I would have put it

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Speaker 1: another way, like did the average person voting in these elections,

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Speaker 1: were they voting on like because I'm poor against bitcoin?

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Speaker 1: Or was it just that these candidates happened to have

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Speaker 1: money flowing into them from crypto candidates? If that makes sense,

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Speaker 1: I would say it's it's much more the latter. I mean,

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Speaker 1: they're there. There weren't really people who were running strictly

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Speaker 1: hun crypto. I mean, you know, you know, getting back

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Speaker 1: to John Federman, I mean a lot of his campaign

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Speaker 1: was that his opponent was had moved to the state

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Speaker 1: recently from New Jersey. So doctor his opponent, yes, Dr Oz,

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Speaker 1: the celebrity physician. Um. So you know, and you know,

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Speaker 1: when we talked to people who are you know, we're

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Speaker 1: kind of in the space in the political realm, you know,

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Speaker 1: when they're looking for candidates, and it's not necessarily that

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Speaker 1: they're looking for experts on crypto or people who are

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Speaker 1: you know, completely immersed in the industry, But what they

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Speaker 1: were looking for was, you know, kind of younger candidates,

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Speaker 1: people who were open to crypto, maybe they had a

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Speaker 1: friend who invested, you know, a lot of the superpack

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Speaker 1: kind of candidate recruitment stuff that went on UM and

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Speaker 1: and you know, and in terms of backing the candidates,

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Speaker 1: and it's not really candidate recruitment, but you know, choosing candidates,

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Speaker 1: they were just looking for people who would be open

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Speaker 1: to uh, you know, open to and understand and have

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Speaker 1: some basic background in crypto. And obviously, UM, you know,

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Speaker 1: I think that it's something that's important, it needs to

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Speaker 1: go forward. But when you get into the nitty gritty

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Speaker 1: of what you know, American politicians run their campaigns on.

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Speaker 1: I mean, it's a lot of negative ads and a

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Speaker 1: lot of mud slinging and uh, you know that this

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Speaker 1: is not the place where you have serious policy discussions

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Speaker 1: about digital assets. And I'll just back up that point.

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Speaker 1: I think, I think the strategy going forward is good

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Speaker 1: to be to continue targeting these younger candidates UM. I

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Speaker 1: talked to the executive director of the Blockchain Association, which

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Speaker 1: REACHED recently launched their own pack that we expect will

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Speaker 1: be more active and sort of the coming elections, and

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Speaker 1: that was essentially what they laid out to me that

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Speaker 1: they feel like these older lawmakers are not as a

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Speaker 1: receptive to maybe new technologies, and so that's really what

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Speaker 1: they're targeting. Um. I guess it remains to be seen

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Speaker 1: now what the attitudes like given everything that's been happening

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Speaker 1: in crypto and the you know, more recent calls for regulation.

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Speaker 1: But we'll have to see how that shapes up. Well.

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Speaker 1: To that point, there's an interesting thing that happens in politics,

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Speaker 1: but also I think in general, a where someone can

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Speaker 1: go from like hero to zero in a very short

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Speaker 1: amount of time. And as we've been reports in various

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Speaker 1: of the folks who had previously been like tripping over

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Speaker 1: themselves to be in photo ops with bank man freed

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Speaker 1: and now like to quote Mariah carry famously, I don't

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Speaker 1: know her. Um, how is that shaping up going into

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Speaker 1: you know, this next round of things. Are you going

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Speaker 1: to see or are you already seeing a sense that

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Speaker 1: crypto is now being like perceived as this toxic asset

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Speaker 1: that nobody wants to touch, or is it opening up

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Speaker 1: the discussion about here, here's actually why we need to

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Speaker 1: engage with digital assets more seriously. I think we're seeing

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Speaker 1: a couple of things. I mean, you're definitely seeing lawmakers

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Speaker 1: distancing themselves from Sam Bankman Freed. So a good example

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Speaker 1: of that is Senator Dick Durbin was one of those

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Speaker 1: people who received contributions from Sam, and he's now saying

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Speaker 1: that he's going to give that money to charity. Um.

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Speaker 1: He's also one of the ones leading some of the

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Speaker 1: probes into Bankman Freed along with Senator Elizabeth Warren. They're

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Speaker 1: both seeking more information on what happening happened when the

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Speaker 1: company collapsed. UM. So you're definitely seeing kind of a

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Speaker 1: turning of the tables. I think we're also seeing this

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Speaker 1: getting highly politicized. Um. You have Missouri Republican Josh Holly

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Speaker 1: is now sort of coming after Democrats. He took money

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Speaker 1: from Bankman Freed and looking for information from federal agencies

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Speaker 1: and Democrats that were engaging with him. Um Worth noting

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Speaker 1: that it wasn't only Democrats that were receiving money from

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Speaker 1: ft X. Obviously, Ryan salome A was a big donate

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Speaker 1: donor as well, and he gave almost exclusively exclusively to Republicans.

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Speaker 1: So everyone is sort of caught up in this. And

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Speaker 1: Ryan Solomy, of course, being one of the co c

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Speaker 1: e o S is one of one of the FTX

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Speaker 1: related entities FTX Trading, which he helped Sam Bankman Freed

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Speaker 1: set up being this major Republican donor as you've identified. Yes,

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Speaker 1: that's right. I mean we saw that Sam Bankman Freed

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Speaker 1: gave about thirty nine million dollars during the mid terms,

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Speaker 1: almost all of it to Democrats. Um, but Ryan gave

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Speaker 1: you know, about twenty three million dollars mostly to Republicans,

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Speaker 1: so um, it was still a lot of money coming

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Speaker 1: to the Republican side as well. Coming up more on

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Speaker 1: crypto's influence on regulation and politics in the US with

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Speaker 1: Alison Verse Brill and Bill Allison now going into three

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Speaker 1: even four sort of staring now in a presidential election.

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Speaker 1: Somehow I feel like we're somehow always in a presidential

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Speaker 1: election given the dynamics that you've both just described. And Bill,

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Speaker 1: I'll ask you this first, do you expect, given kind

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Speaker 1: of the state of crypto right now, where evaluations are

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Speaker 1: where sentiments is that you will see the record highs

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Speaker 1: of donations from crypto affiliated groups that we've been seeing

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Speaker 1: for previous cycles, or do you think that was kind

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Speaker 1: of like the top of that level of giving from

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Speaker 1: this industry. If you look at the numbers, I mean

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Speaker 1: it's the fd X donors. There were three big donors.

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Speaker 1: They represented about eight of everything that crypto gave during

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Speaker 1: the cycle. I you know that altogether it was about

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Speaker 1: you know, eighties some million dollars and you know, they

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Speaker 1: were basically providing the bulk of it um. So the

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Speaker 1: fact that they may not be in the position to

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Speaker 1: donate that was obviously going to put a big primp

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Speaker 1: in and how you know how much money this industry

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Speaker 1: is going to put into politics. But that being said,

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Speaker 1: there's all kinds of different ways to have a big

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Speaker 1: footprint in Washington. One of the you know, the traditional way.

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Speaker 1: You know, if you look at a financial firm, I'm

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Speaker 1: just going to pick them. Uh. You know, Goldman Sacks,

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Speaker 1: which has been very influential, has a strong presence in Washington,

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Speaker 1: has lobbyists, has a political action committee. Goldman Sacks folks

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Speaker 1: aren't making million dollar contributions to super PACs. They're making

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Speaker 1: contributions to party committees, They're making contributions to candidates, They're

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Speaker 1: making contributions to leadership packs. They have an active political

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Speaker 1: action committee. And that's really I think where you may

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Speaker 1: see crypto going is instead of being this this big splash,

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Speaker 1: you know, three people giving tens of millions of dollars,

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Speaker 1: you're going to see a lot a lot of smaller

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Speaker 1: donors but having a you know, potentially having a bigger,

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Speaker 1: more distributed impact. And I would say probably also depends

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Speaker 1: on where we stand on the regulatory and legislative front

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Speaker 1: the next time we have an election. Right if if

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Speaker 1: there's still a lot up in the air and there's

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Speaker 1: potential to you know, influence um what's going on on

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Speaker 1: Capitol Hill or at these agencies, then I think you

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Speaker 1: could see a lot of crypto executive giving money in

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Speaker 1: an attempt to sway the narrative there if they still

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Speaker 1: have money. That is true, we shall just have to

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Speaker 1: see which we markets do bill. Just as a kind

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Speaker 1: of a closing thought for you, as someone who's covered

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Speaker 1: campaign finance for such a long time, can you think

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Speaker 1: of any other industries that sort of kind of the

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Speaker 1: amount of newhere as it relates to giving, Like did

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Speaker 1: we see something like this in the you know, the

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Speaker 1: middle days of tech for instance, Because you know, folks

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Speaker 1: are always trying to you know, figure out like what

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Speaker 1: is crypto like and at least in terms of this

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Speaker 1: parts of the markets, are there progenitors as it were,

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Speaker 1: for this level of giving from a relatively new industry

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Speaker 1: and asset class. I mean, you know, the things that

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Speaker 1: it most reminds me of. I mean, you know, tech

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Speaker 1: is an example where Microsoft had the you know, almost

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Speaker 1: a monopoly in terms of you know, not just software

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Speaker 1: for your operating system, but also things like browsers and

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Speaker 1: Microsoft Word in the office suite. And they had hardly

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Speaker 1: any presence in Washington at all until Washington started to

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Speaker 1: get interested in them and started investigating them for antitrust.

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Speaker 1: And Microsoft went from hardly lobbying at all to building

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Speaker 1: up like almost overnight. They had their DC office, they

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Speaker 1: had their pack, they were giving lots of money. And

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Speaker 1: you know that's the sort of the um that's sort

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Speaker 1: of the I don't know if I would necessarily call

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Speaker 1: it positive. That's kind of like the successful version of it,

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Speaker 1: a less successful version. And this was a company that

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Speaker 1: had been around for a long time. Was Enron, where

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Speaker 1: you have you know, they're in this like you know,

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Speaker 1: new deregulated world of of utilities and natural gas and

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Speaker 1: and they had very close ties of the Bush family,

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Speaker 1: going all the way back. You know, ken Leigh, who

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Speaker 1: was the company's CEO, was George H. W. Bush's head

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Speaker 1: of finance, so he was his top fundraiser. They were

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Speaker 1: the biggest patron for George W. Bush when he was

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Speaker 1: in Texas in terms of campaign contributions and donations and whatnot.

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Speaker 1: And when that company collapsed, everybody walked away from it.

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Speaker 1: I mean, George W. Bush said that he hardly knew

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Speaker 1: anybody at Iron, and I guess the point is it's

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Speaker 1: not necessarily, you know, one company, although obviously Enron was

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Speaker 1: a huge story at the time, but you know, you

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Speaker 1: can walk away from a company, but not necessarily the industry.

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Speaker 1: And just because everything in finance is somehow a circle.

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Speaker 1: The person who helped liquidate Enron and get cash back

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Speaker 1: to those creditors, John Jay Ray the Third is now

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Speaker 1: doing that for FTS, so as one does here. We

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Speaker 1: are well. Thank you both very much. It's always a

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Speaker 1: pleasure having you on and I'm sure we'll have you

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Speaker 1: back again soon since there is so much in this

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Speaker 1: area to talk about. Thanks for having us, Yes, thank you.

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Speaker 1: You can find more of their reporting on the Bloomberg

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Speaker 1: terminal and on Bloomberg dot com. And of course you

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Speaker 1: need to check out our twice weekly newsletter, which is

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Speaker 1: to Crypto at Bloomberg dot net. The supervising producer of

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Speaker 1: Bloomberg Crypto is Vicky very Galina. Our senior producer is

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Speaker 1: Janet Babin. Our producers are Mohammed Faruk and Sharon Barriro.

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Speaker 1: Our associate producers are Ty Butler and Moses on Them.

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Speaker 1: Desta wonder At is our engineer. Original music by Leo Sidron.

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Speaker 1: I'm Stacy Maria Schmel. We'll be back tomorrow