Stabenow took nearly $56K of donations from FTX, then took lead role on crypto bill

Michigan Sen. Debbie Stabenow received at least $55,600 in donations this year from employees of FTX, a cryptocurrency exchange that was later accused of the theft and misuse of client funds. Months after Stabenow received those donations, she took a lead role in a bill that would regulate the cryptocurrency market, allegedly at the behest of FTX founder Samuel Bankman-Fried.

Critics worried that the bill would regulate crypto out of use for all but the biggest players, such as FTX, which at one point was valued at $32 billion. That crypto should be regulated as a commodity was something Bankman-Fried advocated for months, publicly and privately, on media platforms and in meetings with politicians and regulators.

As a story on Protos reported, the head of policy of the Blockchain Association, Jake Chervinsky, warned that “the definition of a ‘Digital Commodity Platform’ may result in an unintended ban on DeFi (decentralized finance) since it can be applied to anyone using DeFi protocols with the consequence of retail traders being regulated as if they are exchanges themselves.”

FTX went bankrupt in November.

Its owner, Bankman-Fried, was arrested Monday in the Bahamas, and authorities seek his return to the United States. Bitcoin.com reports that FTX executives donated $70 million to politicians, Democrats and Republicans, ahead of the November midterm election.

Bankman-Fried faces eight federal charges, including conspiracy to commit wire fraud and securities fraud, as well individual charges of securities fraud and wire fraud. He also faces charges of money laundering and conspiracy to avoid campaign finance regulations.

Bankman-Fried donated $26,600 to Stabenow, according to Federal Election Commission records reviewed by Michigan Capitol Confidential.

On Jan. 13, Bankman-Fried donated $20,800 to the Stabenow Victory Fund. On Feb. 11 he made two more donations of $2,900, totaling $5,800, to Stabenow for U.S. Senate.

Three other FTX employees, Mark Wetjen, Ryne Miller, and Zachary Dexter, also donated to Stabenow. 

Wetjen made a $5,800 donation to the Stabenow Victory Fund on Jan. 12. That’s a day before Bankman-Fried’s first donation. On Feb. 11, he made two donations of $2,900, totaling $5,800, to Stabenow for U.S. Senate.

Miller, on March 16, made two donations of $2,900, totaling $5,800, to Stabenow for U.S. Senate.

Zachary Dexter made three donations to Stabenow, totaling $11,600. On March 22, he donated $5,800 to the Stabenow Victory Fund. On May 3, he made two donations of $2,900, totaling $5,800, to Stabenow for U.S. Senate.

On Aug. 3, Stabenow submitted Senate Bill 4760 of 2022, or the Digital Commodities Consumer Protection Act. It was referred to a committee that Stabenow chairs, the Senate Committee on Agriculture, Nutrition, and Forestry.

• Read it for yourself: The Digital Commodities Consumer Protection Act of 2022

“We’re here today because a rapidly increasing number of Americans are investing in cryptocurrencies, yet there's no federal oversight over the tokens that make up the majority of this market,” Stabenow said at a Sept. 15 meeting of the committee.

Rostin Behnam, chairman of the Commodity Futures Trading Commission, appeared before the committee. The commission regulates crypto as a commodity, and according to Benham, it relies on tips and complaints for its enforcement actions.

If the bill were enacted into law, the commission would have greater regulatory authority and more resources for enforcement, paid for by a user fee on crypto exchanges.

“We need a cop on the beat,” Behnam told the committee.

“We need to have clear, consistent rules of the road,” Stabenow agreed.

When FTX went bankrupt, supporters of the bill argued the collapse was even more reason to push for greater crypto regulation.

Coindesk reports that Stabenow’s co-sponsor in the bill, Sen. John Boozman, R-Arkansas, would continue to push for it.

“Chairwoman [Stabenow] and I remain committed to advancing a final version of the DCCPA that creates a regulatory framework that allows for international cooperation and gives consumers greater confidence that their investments are safe,” Boozman said.

In the crypto community, the Digital Commodities Consumer Protection Act is called the “SBF bill.”

As Coindesk reported:

Bankman-Fried regularly met with regulators and lawmakers, weighing in on how the crypto industry should be regulated. He was a vocal supporter of one bill, in particular: the bipartisan Digital Commodities Consumer Protection Act (DCCPA), a still-in-progress bill backed by Senate Agriculture Committee Chairwoman Sen. Debbie Stabenow and ranking member, Sen. John Boozman.

The Coindesk report continues, and says the bill is perceived as a de facto ban on crypto:

DCCPA’s detractors say it would effectively kill DeFi in the U.S. by making it impossible for large players like Uniswap to comply, which would entrench centralized exchanges. The argument is basically that the regulatory requirements outlined in the latest draft of the bill ... amount to a de-facto ban on DeFi.

In Stabenow’s opening remarks at the Sept. 15 hearing, the regulations she describes seem tailored to stop what FTX stands accused of: having insufficient capital, making fraudulent claims about how customers’ money was used, and running misleading advertising.

“As its name suggests, our bill is focused on consumer protection,” Stabenow said at the hearing. “It will require that platforms segregate and safeguard customer assets, hold sufficient capital and abide by rigorous cybersecurity standards. It will eliminate many of the conflicts of interest in this market. And it will mandate that platforms speak truthfully about the risks of trading digital commodities and don't engage in misleading advertising.”

“We all saw the Super Bowl ads,” Sen. Amy Klobuchar, D-Minnesota, said at the hearing. “Many first-time buyers were convinced to invest, just in time for the market to crash.”

PBS Newshour reports that crypto has lost $2 trillion in value since November 2021.

Fallout from the FTX failure has reached even paid spokespeople, such as Tom Brady and investor Kevin O’Leary, who have been sued by FTX investors.

CapCon reached out to Stabenow’s office to ask if the senator will return the FTX donations, and whether her position on the bill has changed. We have not heard back.