SBF lobbied Congress in favor of FTX, not crypto: Blockchain Association Director

FTX founder Sam Bankman-Fried spent more time lobbying lawmakers in DC than any leader Blockchain Association CEO Kristin Smith has seen in her 20-year career in Washington.

So it’s hardly surprising, in the wake of his crypto empire crumbling amid allegations of fraud and misappropriation of funds, that the tone of talks facilitated by Smith’s crypto lobby group has had to change.

“He did a tremendous amount of damage,” Smith said in the latest episode of Decrypthis gm podcast, making it clear that FTX was never a member of the Blockchain Association.

“Sam testified before Congress several times, he had incredibly detailed proposals [Commodities Future Trading Commission] and also legislative that he worked on,” Smith said. “He spent a tremendous amount of time walking through the halls of Congress, meeting with members, meeting with executives, meeting with staff — he took them out for drinks.

“I have never seen, in my 20-year career in Washington, a leader spend so much time personally lobbying on Capitol Hill,” she added.

Bankman-Fried’s crypto empire, led by crypto exchange FTX, fell apart in November after a leaked balance sheet showed that Alameda Research, his trading desk, held billions of FTT, the FTX tool, against liabilities worth billions. When it became known, users withdrew billions from FTX.

In a last-ditch effort to stay afloat, FTX announced it had a letter of intent to be acquired by rival Binance. But a day into the due diligence process, Binance backed off, saying the company was “beyond our ability to assist.” By the end of the week, Bankman-Fried had pulled out and FTX with 130 other entities filed for Chapter 11 bankruptcy protection.

The bankruptcy was bad, but the federal charges — civil and criminal — pending against Bankman-Fried have made lawmakers even more uncomfortable with how involved he was in the legislation. In fact, it has since emerged during the FTX bankruptcy proceedings that the company had an office across the street from the White House.

“They feel a tremendous sense of betrayal, because they all thought he was so thoughtful, and appreciated his thoughts on regulation. And I mean, quite frankly, from my perspective, it made our job very difficult, because, you know, we had some disagreements with the strategy he was pushing,” she said. “It was very much like an FTX-specific strategy as opposed to a crypto-wide strategy.”

The FTX-specific strategy showed its face when Bankman-Fried backed the Digital Commodities Consumer Protection Act of 2022 in a big way. It was one of the first times that the crypto community criticized him en masse for supporting a bill that had been labeled a “DeFi killer.”

The bill got its nickname because it proposed to use the same rules for registration and compliance of decentralized finance as for centralized entities, such as FTX.

“The definitions of ‘digital commodity platform’ are all designed for centralized depository markets. Yet, as [Sen. Kirsten Gillibrand] starkly pointed out, they can also catch DeFi protocols — no more than code — failing to comply,” Blockchain Association head of policy Jake Chervinsky wrote on Twitter in September.

Currently, there is no indication that the bill will be reintroduced for the 2023 Legislature. Sen. Debbie Stabenow (D-MI), one of the co-sponsors, has actually announced that she will stay leaving office in 2025.