Billionaire Who Tried to Buy Oregon Congressional Seat Goes Bankrupt When His Crypto Company Crashes

Six months ago, billionaire Sam Bankman-Fried spent millions to install his pet candidate in Oregon’s new US congressional seat. Now, the crypto company that made him rich is bankrupt.

Bankman-Fried, a citizen of the Bahamas, disrupted the political order in Oregon last spring by spent $11.4 million to back political newcomer Carrick Flynn’s bid in the state’s new 6th US House District. The Bankman-Fried investment failed in May when former Rep. Lake Oswego’s Andrea Salinas beat Flynn 37% to 19% in the Democratic primary, with the remainder of the vote going to a deep field of other candidates.

Bankman-Fried could use that money now. Yesterday, he tweeted that he closed his crypto trading firm, Alameda Research, and he apologized for the negligence that pushed his crypto exchange FTX to the brink of insolvency.

“I messed up,” Bankman-Fried said on Twitter, “and should do better.”

Today, FTX, Alameda, and 130 other affiliated companies declared bankruptcy, and Bankman-Fried stepped down as CEO of FTX, the company said in a a statement. Bankman-Fried, 30, will stick around to “assist in an orderly transition,” FTX said.

FTX is the latest victim of the crypto crash. Bitcoin, the most well-known crypto currency, has dropped 75% in the past year. It is trading at $16,737 today, down from an all-time high of $66,339 in November 2021.

FTX failed because it loaned billions of customer assets to Alameda, which were used for risky trading, according to The Wall Street Journal. Alameda owes FTX about $ 10 billion, people familiar with the matter told Journals.

Customers pulled $5 billion out of FTX earlier this week, spurring a former bank run, something this crypto is supposed to prevent because owners can hold digital currency without the help of a third party, like a bank.

Bankman-Fried tried all week to keep FTX alive. He had a savior, briefly. Rival crypto exchange Binance has agreed on Tuesday to buy FTX, then backed out a day later, saying it was too sketchy.

“The problem is beyond our control or ability to help,” Binance said in a tweet.

To understand what happens, imagine you have a bunch of stocks and bonds at Charles Schwab, and say Chuck lends them to a hedge fund like Long Term Capital Management (RIP, 2000), which then loses on a risky trade. You hear rumblings about losses and try to get your money back, but Schwab says you can’t have it.

In a lengthy mea culpa on Twitter, Bankman-Fried apologized for a number of mistakes, including a lack of transparency.

“I should have said more,” Bankman-Fried said. “Sorry – I got slammed with things to do and didn’t give you all an update.”

It’s a long fall from grace for Bankman-Fried, who was the friendly face (and bad haircut) of crypto until just a few weeks ago. He wooed Democrats nationally by giving $6 million to the House Majority PAC in April. At the same time, the PAC began endorsing Flynn in the primary race against Salinas. The contribution to Flynn stunned state Democrats because the House Majority PAC usually gives only to Democrats in races against Republicans, not against each other.

Flynn, 35, grew up in Vernonia, where flooding destroyed his family’s home and forced them onto the streets. He went on to attend Yale Law School and took jobs at a series of think tanks. He helped the Biden administration with its pandemic strategy, consulted for a foundation backed by the Facebook fortune, and conducted research at Georgetown University.

Along the way, Flynn befriends Bankman-Fried’s older brother, Gabriel. In May, long after Sam had started donating to his campaign, Flynn told AP he “never had contact with Sam.”

Flynn led Salinas in the polls for the time being as Bankman-Fried’s millions helped him (and his flannel shirt) grace television screens in the new 6th District for months. In the end, however, he fell short.

Now, his benefactors lack something worse than votes: cash. He did not come through with contribution to the general election that the House Majority PAC had expected.

And Salinas? He is leading his Republican rival, Mike Erickson, in the general election and seems poised to become the sixth US congressman in Oregon. The campaign did not immediately return an email seeking comment.

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