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View ProfilesPublished March 1, 2023 at 10:00 a.m.
A who's who of Vermont politicians sipped Citizen Cider and traded small talk in a crowded Montpelier hotel conference room last Thursday, near a poster that bore the name of the event's host: the LGBTQ Victory Institute.
The mood was jubilant as 100-plus attendees celebrated November's election results. A record 14 openly gay or transgender state legislators and two statewide officials won seats, most notably U.S. Rep. Becca Balint (D-Vt.), who notched a historic congressional victory.
Balint didn't attend, but newly elected Vermont Treasurer Mike Pieciak, who is gay, earned big laughs from the crowd during his speech. He began by reading a congratulatory statement from Gov. Phil Scott, who couldn't attend. Lt. Gov. David Zuckerman was one of the event's sponsors.
Emceeing the evening was Marty Rouse, vice president of outreach and engagement for the Victory Institute's political action committee, the LGBTQ Victory Fund. The two branches of the organization work closely together, Rouse said, "to help lift up out LGBT leaders all across this country."
The Victory Institute, a nonprofit, holds trainings and conferences, Rouse explained to the crowd; the fund helps candidates get elected.
Left unsaid: Earlier in the day, the Washington, D.C.-based Victory Fund's super PAC featured prominently in new information made public about a campaign finance scandal involving Sam Bankman-Fried, the disgraced founder of the cryptocurrency exchange FTX. An indictment filed in a fraud case against Bankman-Fried detailed how he allegedly stole investor funds and funneled millions to congressional candidates during the midterms as part of a scheme to buy influence for the cryptocurrency industry. Part of the plan, an unidentified political consultant for Bankman-Fried wrote to an FTX executive last year, was to give to "woke shit for transactional purposes." The executive, identified by the Wall Street Journal as Nishad Singh, later donated more than $1 million to an unnamed LGBTQ political action committee, according to the indictment.
That appears to describe the $1.1 million infusion the LGBTQ Victory Fund Federal PAC received last July — its largest ever — from Singh, FTX's head of engineering. The super PAC spent almost all the money on ads supporting Balint in the final month of her Democratic primary campaign against then-lieutenant governor Molly Gray.
The Victory Fund was in no mood to discuss any of that at last week's celebration.
"I can't talk to you," Rouse said when a reporter introduced himself. "Sorry, I can't."
The court documents, filed by the U.S. Attorney's Office in Manhattan, provide the clearest picture yet of how a crypto baron allegedly misappropriated funds to further his political aims. In Vermont, that translated into a boost for Balint in the guise of support from a pro-LGBTQ group. Gray and Balint were vying to be the Democratic Party's standard-bearer and Vermont's first-ever congresswoman.
"This guy sitting in the Bahamas and his other buddies not only bilked [customers], but they impacted the outcome of a really historically significant race in Vermont," said Carolyn Dwyer, a veteran manager of Vermont political campaigns. She advised the Gray campaign but said she was speaking only for herself. "That just shouldn't happen, and it shouldn't happen again."
The stunning, swift collapse of FTX and its sister cryptocurrency investment firm, Alameda Research, in November resulted from what prosecutors now allege was a multibillion-dollar fraud, one of the largest in U.S. history. Bankman-Fried, the 30-year-old former industry darling, is accused of raiding customer funds deposited in FTX's cryptocurrency exchange as capital for his and Alameda's other ventures.
One of those ventures, according to last week's indictment, was an effort to flood the 2022 midterms with cash in order to curry favor on Capitol Hill at a pivotal moment for the largely unregulated, risky and lucrative cryptocurrency industry. Bankman-Fried ultimately directed tens of millions of dollars to Democratic and Republican candidates, making him one of the country's largest political donors last year. Many of the funds, prosecutors allege, were distributed under the names of other people to obscure the money's true source, an illegal tactic known as a straw-donor scheme.
It was no secret that Bankman-Fried planned to spend big during the midterms; he'd said he might spend up to $1 billion on campaigns over the ensuing few years. Bankman-Fried, who cultivated an image as a leader of a new breed of altruistic capitalists, channeled much of his spending through groups that purported to be dedicated to preventing future pandemics. One of the groups gave millions in grants to news outlets to support reporting on the topic.
Bankman-Fried's brother, Gabe, started an advocacy group funded by FTX called Guarding Against Pandemics. The organization purchased a luxury D.C. town house where Gabe reportedly hosted cocktail parties for politicians. In spring 2022, Guarding Against Pandemics began endorsing candidates, while a related super PAC called Protect Our Future spent heavily to support them.
The pandemic-focused outfits made an early splash in a primary race in Oregon, where Protect Our Future spent $11 million to support a virtually unknown candidate named Carrick Flynn, who ultimately lost in May. The Bankman-Fried brothers said they backed Flynn because of his policy positions on pandemic prevention.
As primary season wore on, Sam Bankman-Fried and his inner circle allegedly devised a scheme to obscure the breadth of their spending and circumvent donation limits.
It's not clear why they took a particular interest in Vermont's Democratic House primary, which involved first-time candidates who were unlikely to wield power in Congress anytime soon. But Guarding Against Pandemics met with the three top Democratic candidates.
State Sen. Kesha Ram Hinsdale (D-Chittenden-Southeast), who dropped out of the congressional race last May, and Gray both told Seven Days that the group contacted them to schedule an endorsement interview. Both met virtually with Gabe Bankman-Fried and another Guarding Against Pandemics staffer in early 2022, the candidates said.
Crypto policy was never mentioned in the interviews, they said. Ram Hinsdale, who backed Balint after dropping out of the race to run for state Senate, told Seven Days last summer that she believed — in a "Pollyannish" way — that the group seemed sincerely interested in pandemic preparedness. She had a Zoom meeting with the group in mid-February.
"From what I experienced," Ram Hinsdale said in August, "I just think they want to have some friends in Washington."
In an email on Monday, Gray told Seven Days that she met with the group virtually on January 14, 2022. Guarding Against Pandemics "alleged they were interested in supporting candidates who would make pandemic prevention their top priority in Congress," she wrote. "During the meeting they asked me whether I would, if elected, be willing to make an appropriation's request in support of pandemic prevention."
Gray said she declined and, based on that answer, did not expect the group's endorsement. Weeks later, she said, she learned the group was linked to cryptocurrency executives and told her campaign manager she "wanted no contact with these groups or any cryptocurrency advocates, groups or individuals."
The Balint campaign said it first met with Guarding Against Pandemics a few months later, in May. Campaign manager Natalie Silver previously told Seven Days that Balint met with Gabe Bankman-Fried at a lunch in D.C. and also for a virtual interview. They knew that Gabe was Sam's brother, but, Silver said, the campaign got assurances that Guarding Against Pandemics had nothing to do with cryptocurrency.
The group's "sole focus is people who are going to be strong advocates for pandemic prevention, and Becca checked those boxes for them," Silver told Seven Days in August. "She believed in the mission of their organization and felt like it was in line with her values. And so they thought she was the best candidate in the race for that."
Guarding Against Pandemics endorsed Balint on June 9, the same day that Gray and Balint squared off in a debate.
Over the next two weeks, the Bankman-Fried brothers and four others linked to them donated the maximum legal amount directly to Balint, $2,900 each. They were six of just 41 people who cut $2,900 checks to the Balint campaign during the primary.
During the June 9 debate, Gray asked Balint to commit to holding a joint press conference to denounce any third-party spending that might come into the race. (Balint's concise reply: "Yes.") Afterward, in an interview with Seven Days, Silver alleged that Gray asked the question because she was upset about missing out on Guarding Against Pandemics' endorsement.
Around that time, Balint's online policy platform was updated to include specific pandemic-related language that Silver acknowledged had been provided by Gabe Bankman-Fried's group.
Balint's website also appeared to use a tactic known as "red-boxing." The technique allows campaigns to create a section of their website — accessible by clicking a red box — that contains photos, B-roll and messaging that super PACs can use in mailers, TV or radio ads. The scheme is technically legal but allows campaigns to skirt rules against coordinating with outside groups. Silver denied using the tactic, but the red box that was once on the site disappeared after Seven Days and VTDigger.org reported on it.
A few weeks later, the LGBTQ Victory Fund Federal PAC began inundating voters with pro-Balint mailers and ads. The $991,911 the super PAC spent was nearly equal to the $1.24 million the Balint campaign itself spent during the primary.
The timing meant the Victory Fund was not legally required to disclose the source of its new funds until after the primary election. When the Gray campaign criticized the surge of outside spending, Balint did not stand alongside her to denounce it. Silver instead told VTDigger.org that Gray's criticism was "very close to saying, you know, 'We don't want a gay agenda.'"
The Victory Fund took a similar tack, writing to Seven Days at the time that "anyone questioning why the LGBTQ community is rallying behind an out LGBTQ Congressional candidate who has dedicated her life to fighting for our rights needs to take a serious look in the mirror."
The indictment against Sam Bankman-Fried makes clear that the dollars leveraged by the Victory Fund did not originate from the LGBTQ community or its genuine allies. In fact, in messages with Sam Bankman-Fried's unnamed political consultant, Singh had expressed discomfort with being the face of the donation to an LGBTQ cause, but the two agreed there was no one "trusted at FTX [who was] bi/gay" to do so, the court documents say.
Singh pleaded guilty on Tuesday to six criminal counts related to the FTX conspiracy, including conspiracy to defraud the Federal Election Commission for his role in the straw-donor scheme.
"I am unbelievably sorry for my role in all of this," he reportedly said during a federal court hearing in Manhattan.
Seven Days revealed the source of the Victory Fund spending in August, when the group was required to file a financial disclosure postprimary. Balint and Silver said they didn't know Singh and had not solicited the money, which would have been illegal. Silver denounced Singh's contribution as "problematic."
But the campaign continued to accept money from people in the Bankman-Fried orbit. It received $2,900 contributions in October, during the homestretch of the general election, from Singh; Gabe Bankman-Fried; Ross Rheingans-Yoo of the FTX Foundation; Protect Our Future PAC's then-president, Michael Sadowsky; and Data for Progress' then-executive director, Sean McElwee, who served as a political consultant to Sam Bankman-Fried and whose firm was paid by Protect Our Future to conduct polling.
Seven Days tallied at least $34,459 in direct contributions to Balint from nine people connected to Bankman-Fried or Data for Progress, plus $1,000 more from the Guarding Against Pandemics PAC.
"The campaign has no knowledge of how Mr. Bankman-Fried or Mr. Singh's political contributions were determined," Silver said in a statement on Tuesday. "The campaign had no contact with the LGBTQ Victory Fund federal independent expenditure PAC, and has no knowledge of The LGBTQ Victory Fund's interactions with their donors or their plans for their funds. The campaign, in compliance with federal campaign finance law, does not communicate or coordinate with SuperPACS in any way."
Balint wasn't the only Vermont recipient of the FTX contributions: Sam Bankman-Fried gave $9,752 to the Vermont Democratic Party in late August, and Gabe Bankman-Fried contributed $10,000 in October. Now-U.S. Sen. Peter Welch (D-Vt.) received $1,000 from the Guarding Against Pandemics PAC in March and $2,900 each from Sam and Gabe Bankman-Fried, Singh, and Sadowsky.
The direct contributions to Balint, Welch and the Vermont Democratic Party totaled at least $67,811, according to Seven Days' review of Federal Election Commission records.
Asked if Welch ever met with Guarding Against Pandemics, his campaign declined to comment on his schedule.
"The campaign is following the guidance of the U.S. Bankruptcy Court and Department of Justice in this matter," the Welch campaign said in a statement.
The VDP received the Bankman-Frieds' donations through the Democratic National Committee, executive director Jim Dandeneau said on Monday. The party will follow the DNC's guidance regarding the potential return of the funds.
He described the country's campaign finance system as "broken and ugly" and noted that the U.S. Supreme Court's 2010 Citizens United decision opened the floodgates to political spending.
Balint's campaign has been in contact with the U.S. Attorney's Office in Manhattan and is "fully supporting their investigation" into Sam Bankman-Fried and FTX, according to Silver. The Victory Fund, meanwhile, said in a statement that it has set aside funds "and will take appropriate action once we receive guidance from authorities."
The Victory Fund had just $200,000 in cash as of January, according to its most recent federal filings, far less than the nearly $1 million of FTX money it spent to support Balint. The Balint campaign, similarly, didn't appear to have cash on hand equivalent to the total donations it received from Sam Bankman-Fried and his associates.
The Victory Fund remains in good standing among Vermont politicos, if attendance at last week's celebration was any indication. To a round of applause and cheers, Rouse, the group's vice president of outreach and engagement, noted that Gray was among the "strong allies" in the crowd.
Seven Days later asked Gray why she attended, given the group's link to the outside money spent in her race.
"Whether in or out of elected office," she responded in an email, "I will never stop showing up for Vermont's LGBTQ+ community."
The original print version of this article was headlined "Money for Her Run | Court filing reveals how crypto moguls tarnished a historic Vermont election"
Tags: Politics, Becca Balint, cryptocurrency, crypto, Sam Bankman-Fried, FTX
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