WEBVTT - What Does Political Giving Look Like Post-FTX?

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<v Speaker 1>This is Bloomberg Crypto, a daily Bloomberg I Heard podcast,

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<v Speaker 1>and I'm Stacy Marie Ishmael, Managing editor of Crypto for

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

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<v Speaker 1>in politics in the US is real and well established,

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<v Speaker 1>and that includes when that money is either in the

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<v Speaker 1>form of crypto or comes from people who made their

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<v Speaker 1>fortunes in digital assets. The recently concluded US midterm elections

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<v Speaker 1>featured several candidates, including winning ones, whose campaigns were financed

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<v Speaker 1>in pot by crypto related donors and donations. Among those

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<v Speaker 1>donors Sam Bankman, Fried and Ryan Slamy of FTX, who

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<v Speaker 1>supported candidates on opposite ends of the political spectrum. To

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<v Speaker 1>be clear, the collapse of FTX has now led to

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<v Speaker 1>some of those same politicians and willmakers who received donations

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<v Speaker 1>from people like Bankman, Freed and Salami to attempt to

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<v Speaker 1>distance themselves entirely from their benefactors. For more in the

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<v Speaker 1>state of crypto money and politics in the US were

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<v Speaker 1>joined by Bloomberg reports. Alison Versprill Dam Big Ben Freed

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<v Speaker 1>gave about thirty nine million dollars during the mid terms,

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<v Speaker 1>almost all of it to Democrats, but Ryan gave you know,

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<v Speaker 1>about twenty three million dollars mostly to Republicans. And Bill Allison,

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<v Speaker 1>if you look at the numbers, I mean it's the

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<v Speaker 1>ft X donors. There were three big donors. They represented

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<v Speaker 1>about eight of everything that Crypto gave during the cycle. Bill,

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<v Speaker 1>welcome back to the podcast. Please reintroduce yourself to our audiences.

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<v Speaker 1>And Bill Allison, I cover politics and campaign finance and

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<v Speaker 1>Ali great to have you back in the show. I'm

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<v Speaker 1>Alison versus Brill and I cover crypto regulation. So you know,

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<v Speaker 1>between regulation and campaign finance and politics, some things have

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

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<v Speaker 1>for people who don't sort of obsessively follow the twist

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<v Speaker 1>and turns of either campaign finance or US politics, can

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<v Speaker 1>you just do a quick scene set of what's been

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<v Speaker 1>happening and what are the interconnections that you're observing between

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<v Speaker 1>crypto and US politics right now? Well, we just had

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<v Speaker 1>a midterm election, which is when um uh generally speaking,

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<v Speaker 1>the party that holds the White House loses a lot

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<v Speaker 1>of seats in Congress, and and this is to elect

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<v Speaker 1>basically the House and the Senate. UM. And we were

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<v Speaker 1>expecting and even you know, a lot of people predicting

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<v Speaker 1>a red way for Republicans to do really well, uh,

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<v Speaker 1>taking the House by wider margin, taking the Senate, and

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<v Speaker 1>instead we kind of had a status quo mid term. Um.

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<v Speaker 1>Democrats are right now even where they were in the Senate,

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<v Speaker 1>they may even pick up one more seat, and Republicans

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<v Speaker 1>have narrowly won the House. Now, what this means for

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<v Speaker 1>Washington is that we're going to be in a state

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<v Speaker 1>of gridlock. That's about where we are right now. And

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<v Speaker 1>you know, crypto kind of falls into the middle of

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<v Speaker 1>this because it is going to be an issue in

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<v Speaker 1>the next Congress given what's happened uh in uh with

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<v Speaker 1>f t X modern development. Since the stunning collapse of

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<v Speaker 1>former billionaire sen Bankman Freed's ft X empire last week,

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<v Speaker 1>one of the two biggest crypto exchanges in the world

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<v Speaker 1>is no more. There are now reports of unauthorized withdrawals

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<v Speaker 1>of funds after fd X and related entities were placed

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<v Speaker 1>in bankruptcy. And that's in't just that customers who are

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<v Speaker 1>not able to withdraw funds are unlike recover much. There

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<v Speaker 1>been accusations that it was misappropriating funds um using its

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<v Speaker 1>ties with Alameda Research, the trading arm that was also

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<v Speaker 1>founded by Sam Bankman Freed. And so we've definitely seen

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<v Speaker 1>UM failures across the board that's now rippling throughout the

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<v Speaker 1>crypto markets broadly UM, and we're starting to see other

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<v Speaker 1>companies suffer as well. So it's been a busy few

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<v Speaker 1>weeks in the in the crypto space, if that might

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<v Speaker 1>be the understatement of the century, as all of us

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<v Speaker 1>can confirm the level of business. And you know, Bill,

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<v Speaker 1>just to go back to your point, So the folks

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<v Speaker 1>who were elected or not elected in some cases roughly

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<v Speaker 1>what was the split in terms of either whether they

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<v Speaker 1>were kind of funded by crypto money or had taken

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<v Speaker 1>positions on crypto and one way or the other. So,

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<v Speaker 1>you know, crypto candidates did reasonably well. Um uh. You

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<v Speaker 1>know among the people that they backed were like, for example,

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<v Speaker 1>John Fetterman, the u AT candidate from Pennsylvania Democrat. He

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<v Speaker 1>won his election. UM. A lot of the people that

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<v Speaker 1>were backed by something called the g M I pack

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<v Speaker 1>and the web three Forward pack. House and Senate candidates

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<v Speaker 1>did well. So you know a lot of things broke

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<v Speaker 1>the way that the crypto industry wanted. But we're only

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<v Speaker 1>talking really about. You know, maybe you know fifteen twenty

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<v Speaker 1>people and in a Congress of you know, four thirty

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

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<v Speaker 1>but this is sort of how things go on Washington,

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<v Speaker 1>that you kind of get the beachhead of people who

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<v Speaker 1>care about your issue and know about your industry, uh

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<v Speaker 1>in place, and then you know the ideas that then

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<v Speaker 1>you would work with the lobbyists where they would work

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<v Speaker 1>with the lobbyists and other folks who are part of

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<v Speaker 1>the government relations people of from that industry, who would

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<v Speaker 1>you know, basically spread the word to other members of

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<v Speaker 1>Congress and uh, you know. So so in that sense,

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<v Speaker 1>I mean, I think the crypto was able to do

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<v Speaker 1>what it wanted to. You know. One of the things

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<v Speaker 1>that has not necessarily been clear is that there is

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<v Speaker 1>like a unified crypto US as it were, right, And

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<v Speaker 1>a big criticism levied against Sam bank mun Freed is

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<v Speaker 1>that he had positioned himself as this person who was

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<v Speaker 1>advocating for certain types of regulation ostensibly on behalf of

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<v Speaker 1>the whole crypto industry, but in in terms of the

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<v Speaker 1>details in ways that would have benefited his particular slice

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<v Speaker 1>of that industry. In particular, are there other things that

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<v Speaker 1>over the course of the mid terms, or at least

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<v Speaker 1>the candidacy of the mid terms, that you saw sort

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<v Speaker 1>of emerges campaign issues. If I would have put it

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<v Speaker 1>another way, like did the average person voting in these elections,

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<v Speaker 1>were they voting on like because I'm poor against bitcoin?

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<v Speaker 1>Or was it just that these candidates happened to have

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<v Speaker 1>money flowing into them from crypto candidates? If that makes sense,

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<v Speaker 1>I would say it's it's much more the latter. I mean,

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

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<v Speaker 1>hun crypto. I mean, you know, you know, getting back

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<v Speaker 1>to John Federman, I mean a lot of his campaign

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<v Speaker 1>was that his opponent was had moved to the state

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<v Speaker 1>recently from New Jersey. So doctor his opponent, yes, Dr Oz,

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<v Speaker 1>the celebrity physician. Um. So you know, and you know,

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<v Speaker 1>when we talked to people who are you know, we're

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<v Speaker 1>kind of in the space in the political realm, you know,

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

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<v Speaker 1>they're looking for experts on crypto or people who are

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<v Speaker 1>you know, completely immersed in the industry, But what they

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<v Speaker 1>were looking for was, you know, kind of younger candidates,

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<v Speaker 1>people who were open to crypto, maybe they had a

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<v Speaker 1>friend who invested, you know, a lot of the superpack

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<v Speaker 1>kind of candidate recruitment stuff that went on UM and

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<v Speaker 1>and you know, and in terms of backing the candidates,

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

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<v Speaker 1>they were just looking for people who would be open

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<v Speaker 1>to uh, you know, open to and understand and have

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<v Speaker 1>some basic background in crypto. And obviously, UM, you know,

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<v Speaker 1>I think that it's something that's important, it needs to

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<v Speaker 1>go forward. But when you get into the nitty gritty

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<v Speaker 1>of what you know, American politicians run their campaigns on.

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<v Speaker 1>I mean, it's a lot of negative ads and a

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<v Speaker 1>lot of mud slinging and uh, you know that this

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<v Speaker 1>is not the place where you have serious policy discussions

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<v Speaker 1>about digital assets. And I'll just back up that point.

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<v Speaker 1>I think, I think the strategy going forward is good

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<v Speaker 1>to be to continue targeting these younger candidates UM. I

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<v Speaker 1>talked to the executive director of the Blockchain Association, which

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<v Speaker 1>REACHED recently launched their own pack that we expect will

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<v Speaker 1>be more active and sort of the coming elections, and

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<v Speaker 1>that was essentially what they laid out to me that

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<v Speaker 1>they feel like these older lawmakers are not as a

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<v Speaker 1>receptive to maybe new technologies, and so that's really what

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<v Speaker 1>they're targeting. Um. I guess it remains to be seen

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<v Speaker 1>now what the attitudes like given everything that's been happening

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<v Speaker 1>in crypto and the you know, more recent calls for regulation.

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<v Speaker 1>But we'll have to see how that shapes up. Well.

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<v Speaker 1>To that point, there's an interesting thing that happens in politics,

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<v Speaker 1>but also I think in general, a where someone can

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<v Speaker 1>go from like hero to zero in a very short

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<v Speaker 1>amount of time. And as we've been reports in various

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<v Speaker 1>of the folks who had previously been like tripping over

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<v Speaker 1>themselves to be in photo ops with bank man freed

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<v Speaker 1>and now like to quote Mariah carry famously, I don't

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<v Speaker 1>know her. Um, how is that shaping up going into

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<v Speaker 1>you know, this next round of things. Are you going

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<v Speaker 1>to see or are you already seeing a sense that

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<v Speaker 1>crypto is now being like perceived as this toxic asset

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<v Speaker 1>that nobody wants to touch, or is it opening up

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<v Speaker 1>the discussion about here, here's actually why we need to

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<v Speaker 1>engage with digital assets more seriously. I think we're seeing

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

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<v Speaker 1>distancing themselves from Sam Bankman Freed. So a good example

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<v Speaker 1>of that is Senator Dick Durbin was one of those

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<v Speaker 1>people who received contributions from Sam, and he's now saying

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<v Speaker 1>that he's going to give that money to charity. Um.

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<v Speaker 1>He's also one of the ones leading some of the

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<v Speaker 1>probes into Bankman Freed along with Senator Elizabeth Warren. They're

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<v Speaker 1>both seeking more information on what happening happened when the

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<v Speaker 1>company collapsed. UM. So you're definitely seeing kind of a

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<v Speaker 1>turning of the tables. I think we're also seeing this

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<v Speaker 1>getting highly politicized. Um. You have Missouri Republican Josh Holly

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<v Speaker 1>is now sort of coming after Democrats. He took money

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<v Speaker 1>from Bankman Freed and looking for information from federal agencies

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<v Speaker 1>and Democrats that were engaging with him. Um Worth noting

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<v Speaker 1>that it wasn't only Democrats that were receiving money from

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<v Speaker 1>ft X. Obviously, Ryan salome A was a big donate

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<v Speaker 1>donor as well, and he gave almost exclusively exclusively to Republicans.

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<v Speaker 1>So everyone is sort of caught up in this. And

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<v Speaker 1>Ryan Solomy, of course, being one of the co c

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<v Speaker 1>e o S is one of one of the FTX

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<v Speaker 1>related entities FTX Trading, which he helped Sam Bankman Freed

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

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<v Speaker 1>that's right. I mean we saw that Sam Bankman Freed

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<v Speaker 1>gave about thirty nine million dollars during the mid terms,

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<v Speaker 1>almost all of it to Democrats. Um, but Ryan gave

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<v Speaker 1>you know, about twenty three million dollars mostly to Republicans,

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<v Speaker 1>so um, it was still a lot of money coming

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<v Speaker 1>to the Republican side as well. Coming up more on

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<v Speaker 1>crypto's influence on regulation and politics in the US with

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<v Speaker 1>Alison Verse Brill and Bill Allison now going into three

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<v Speaker 1>even four sort of staring now in a presidential election.

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<v Speaker 1>Somehow I feel like we're somehow always in a presidential

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

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<v Speaker 1>I'll ask you this first, do you expect, given kind

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<v Speaker 1>of the state of crypto right now, where evaluations are

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<v Speaker 1>where sentiments is that you will see the record highs

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<v Speaker 1>of donations from crypto affiliated groups that we've been seeing

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<v Speaker 1>for previous cycles, or do you think that was kind

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<v Speaker 1>of like the top of that level of giving from

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<v Speaker 1>this industry. If you look at the numbers, I mean

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<v Speaker 1>it's the fd X donors. There were three big donors.

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<v Speaker 1>They represented about eight of everything that crypto gave during

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<v Speaker 1>the cycle. I you know that altogether it was about

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<v Speaker 1>you know, eighties some million dollars and you know, they

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<v Speaker 1>were basically providing the bulk of it um. So the

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<v Speaker 1>fact that they may not be in the position to

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<v Speaker 1>donate that was obviously going to put a big primp

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<v Speaker 1>in and how you know how much money this industry

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<v Speaker 1>is going to put into politics. But that being said,

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<v Speaker 1>there's all kinds of different ways to have a big

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<v Speaker 1>footprint in Washington. One of the you know, the traditional way.

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<v Speaker 1>You know, if you look at a financial firm, I'm

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<v Speaker 1>just going to pick them. Uh. You know, Goldman Sacks,

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<v Speaker 1>which has been very influential, has a strong presence in Washington,

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<v Speaker 1>has lobbyists, has a political action committee. Goldman Sacks folks

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<v Speaker 1>aren't making million dollar contributions to super PACs. They're making

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<v Speaker 1>contributions to party committees, They're making contributions to candidates, They're

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<v Speaker 1>making contributions to leadership packs. They have an active political

0:12:58.520 --> 0:13:01.600
<v Speaker 1>action committee. And that's really I think where you may

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<v Speaker 1>see crypto going is instead of being this this big splash,

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<v Speaker 1>you know, three people giving tens of millions of dollars,

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<v Speaker 1>you're going to see a lot a lot of smaller

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<v Speaker 1>donors but having a you know, potentially having a bigger,

0:13:13.440 --> 0:13:17.040
<v Speaker 1>more distributed impact. And I would say probably also depends

0:13:17.120 --> 0:13:20.400
<v Speaker 1>on where we stand on the regulatory and legislative front

0:13:20.440 --> 0:13:23.199
<v Speaker 1>the next time we have an election. Right if if

0:13:23.240 --> 0:13:25.800
<v Speaker 1>there's still a lot up in the air and there's

0:13:25.840 --> 0:13:29.400
<v Speaker 1>potential to you know, influence um what's going on on

0:13:29.480 --> 0:13:32.000
<v Speaker 1>Capitol Hill or at these agencies, then I think you

0:13:32.040 --> 0:13:36.480
<v Speaker 1>could see a lot of crypto executive giving money in

0:13:36.520 --> 0:13:42.120
<v Speaker 1>an attempt to sway the narrative there if they still

0:13:42.160 --> 0:13:46.360
<v Speaker 1>have money. That is true, we shall just have to

0:13:46.400 --> 0:13:51.160
<v Speaker 1>see which we markets do bill. Just as a kind

0:13:51.160 --> 0:13:54.120
<v Speaker 1>of a closing thought for you, as someone who's covered

0:13:54.120 --> 0:13:57.080
<v Speaker 1>campaign finance for such a long time, can you think

0:13:57.120 --> 0:14:00.040
<v Speaker 1>of any other industries that sort of kind of the

0:14:00.080 --> 0:14:04.079
<v Speaker 1>amount of newhere as it relates to giving, Like did

0:14:04.120 --> 0:14:06.040
<v Speaker 1>we see something like this in the you know, the

0:14:06.360 --> 0:14:09.240
<v Speaker 1>middle days of tech for instance, Because you know, folks

0:14:09.240 --> 0:14:11.199
<v Speaker 1>are always trying to you know, figure out like what

0:14:11.320 --> 0:14:13.640
<v Speaker 1>is crypto like and at least in terms of this

0:14:13.840 --> 0:14:17.040
<v Speaker 1>parts of the markets, are there progenitors as it were,

0:14:17.280 --> 0:14:20.720
<v Speaker 1>for this level of giving from a relatively new industry

0:14:20.720 --> 0:14:23.680
<v Speaker 1>and asset class. I mean, you know, the things that

0:14:23.720 --> 0:14:25.480
<v Speaker 1>it most reminds me of. I mean, you know, tech

0:14:25.640 --> 0:14:28.800
<v Speaker 1>is an example where Microsoft had the you know, almost

0:14:28.800 --> 0:14:31.520
<v Speaker 1>a monopoly in terms of you know, not just software

0:14:31.640 --> 0:14:34.640
<v Speaker 1>for your operating system, but also things like browsers and

0:14:34.840 --> 0:14:38.520
<v Speaker 1>Microsoft Word in the office suite. And they had hardly

0:14:38.560 --> 0:14:42.160
<v Speaker 1>any presence in Washington at all until Washington started to

0:14:42.160 --> 0:14:46.160
<v Speaker 1>get interested in them and started investigating them for antitrust.

0:14:46.200 --> 0:14:49.000
<v Speaker 1>And Microsoft went from hardly lobbying at all to building

0:14:49.080 --> 0:14:53.360
<v Speaker 1>up like almost overnight. They had their DC office, they

0:14:53.360 --> 0:14:56.120
<v Speaker 1>had their pack, they were giving lots of money. And

0:14:56.360 --> 0:14:59.800
<v Speaker 1>you know that's the sort of the um that's sort

0:14:59.800 --> 0:15:01.480
<v Speaker 1>of the I don't know if I would necessarily call

0:15:01.520 --> 0:15:04.880
<v Speaker 1>it positive. That's kind of like the successful version of it,

0:15:05.160 --> 0:15:07.440
<v Speaker 1>a less successful version. And this was a company that

0:15:07.480 --> 0:15:09.880
<v Speaker 1>had been around for a long time. Was Enron, where

0:15:09.880 --> 0:15:11.800
<v Speaker 1>you have you know, they're in this like you know,

0:15:11.880 --> 0:15:16.800
<v Speaker 1>new deregulated world of of utilities and natural gas and

0:15:16.800 --> 0:15:19.040
<v Speaker 1>and they had very close ties of the Bush family,

0:15:19.080 --> 0:15:21.000
<v Speaker 1>going all the way back. You know, ken Leigh, who

0:15:21.040 --> 0:15:24.960
<v Speaker 1>was the company's CEO, was George H. W. Bush's head

0:15:24.960 --> 0:15:27.720
<v Speaker 1>of finance, so he was his top fundraiser. They were

0:15:27.720 --> 0:15:30.240
<v Speaker 1>the biggest patron for George W. Bush when he was

0:15:30.280 --> 0:15:33.760
<v Speaker 1>in Texas in terms of campaign contributions and donations and whatnot.

0:15:34.320 --> 0:15:38.360
<v Speaker 1>And when that company collapsed, everybody walked away from it.

0:15:38.400 --> 0:15:40.280
<v Speaker 1>I mean, George W. Bush said that he hardly knew

0:15:40.280 --> 0:15:43.160
<v Speaker 1>anybody at Iron, and I guess the point is it's

0:15:43.160 --> 0:15:47.240
<v Speaker 1>not necessarily, you know, one company, although obviously Enron was

0:15:47.520 --> 0:15:50.720
<v Speaker 1>a huge story at the time, but you know, you

0:15:50.720 --> 0:15:53.320
<v Speaker 1>can walk away from a company, but not necessarily the industry.

0:15:53.720 --> 0:15:56.440
<v Speaker 1>And just because everything in finance is somehow a circle.

0:15:56.720 --> 0:16:01.760
<v Speaker 1>The person who helped liquidate Enron and get cash back

0:16:01.840 --> 0:16:06.200
<v Speaker 1>to those creditors, John Jay Ray the Third is now

0:16:06.400 --> 0:16:10.640
<v Speaker 1>doing that for FTS, so as one does here. We

0:16:10.680 --> 0:16:13.400
<v Speaker 1>are well. Thank you both very much. It's always a

0:16:13.400 --> 0:16:15.120
<v Speaker 1>pleasure having you on and I'm sure we'll have you

0:16:15.160 --> 0:16:17.320
<v Speaker 1>back again soon since there is so much in this

0:16:17.400 --> 0:16:22.120
<v Speaker 1>area to talk about. Thanks for having us, Yes, thank you.

0:16:22.120 --> 0:16:24.160
<v Speaker 1>You can find more of their reporting on the Bloomberg

0:16:24.240 --> 0:16:27.000
<v Speaker 1>terminal and on Bloomberg dot com. And of course you

0:16:27.040 --> 0:16:29.440
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<v Speaker 1>to Crypto at Bloomberg dot net. The supervising producer of

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0:17:00.240 --> 0:17:04.000
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<v Speaker 1>I'm Stacy Maria Schmel. We'll be back tomorrow