Former US politician demands refunds from bankrupt FTX

Sam Bankman-Fried, the bankrupt criptocurrency exchange firm that was founded by a disgraced entrepreneur, is demanding refunds of donations made to politicians before its spectacular collapse last year.

FTX and its debtors are backing up their demand for the return of money donated by Bankman-Fried prior to the company's bankruptcy in November with the threat of legal action, according to confidential messages sent to numerous political figures and action groups.

A press release from FTX dated Sunday stated that any politician or group that does not make a voluntary refund faces the possibility of a lawsuit by the bankruptcy court to recover the money, plus interest accrued since the start of any action.

The company wanted to claw back hundreds of millions of dollars in political donations to celebrities, charities and Republican and Democratic politicians in December.

Bankman- Fried, who has not pleaded not guilty to criminal charges that he defrauded investors in FTX, is in jail on $250 m bail at his parents home in California. The former billionaire, who conducted what prosecutors say was one of the biggest frauds in American history, was extradited from the Bahamas in December.

Bankman- Fried and other members of the FTX leadership donated large amounts to charities, endowing the FTX FoundationFTX Foundation and FTX Future Fund to promote his interests, as well as political causes. The organization reported in October that the FTX FoundationFTX Foundation had given away $140 million.

The US attorney for the southern district of New York, Damian Williams, said that Bankman-Fried and his colleagues siphoned off billions of dollars in customer funds from FTX to spend on luxury properties, other investments, political contributions and to prop up a hedge fund set up by Bankman-Fried.

Many politicians, including several high-profile Democrats, have already returned money they received or set aside to await further guidance, and are presumed to have been stung by the association with the failed company.

In November, a Democratic former candidate in the US Senate and governornatorial races in Texas, Beto O Rourke sent back a check for $1 m from Bankman-Fried, one week before FTX collapsed. His campaign said at the time that it was taken aback by the size of the unsolicited donation, the Texas Tribune reported.

The Democratic National Committee, along with the party's senatorial and congressional campaign committees, said they would return donations.

Recovery of payments to politicians and charities is likely to be one of the easier parts of the bankruptcy process for FTX, according to experts.

Payments or transfers made within 90 days of bankruptcy are presumed to be preferential if they result in a creditor getting more than what they would have been entitled to at the end of the bankruptcy process, and a clawback can try to recover the difference in payments.

FTX is warning those who are seeking refunds that they may not give away any of the money, despite making numerous large charity donations of its own.

The press release states that the FTX debtors can't seek recovery from a recipient if a payment or donation is made to a third party including a charity.

The FTX, once valued at $32 billion, said last month it had recovered $5 billion, not including assets seized by the Securities Commission of the Bahamas. The full scale of the losses has not yet been calculated.