Hello and welcome. You are listening to Patrick
Boyle on Finance, a podcast exploring ideas from
quantitative finance, examining events occurring in markets
right now and financial history to see what lessons can be taken
away, including interviews with some of the most interesting
people in the world of finance. To learn more about the podcast,
visit on finance.org. With a bit over a month to go
till the US elections this November, it might surprise you
to learn that the crypto industry has spent almost $120
million already this year in political contributions, meaning
that crypto makes up for almost half of all corporate political
contributions in this election cycle.
I'm sure you've seen all of the political adverts telling you
how important this industry is to the average American and how
you should vote for a crytofriendly candidate, no?
Well, that would be because that's not how the
advertisements work. The contributors know that the
average American doesn't care one bit about crypto.
When the Super PAC's funded by the crypto industry spent money
to influence races, either by attacking crypto skeptics or
boosting crypto supporters, the ads never mention crypto at all.
A few of you are possibly nodding your head, saying, Yep,
it'll be Trump. He'll be on their payroll.
After all. He famously called Bitcoin a
scam against a dollar in 2021, and then a bit over a year later
licensed his image for a series of NFTS.
This summer, he even flew to Nashville to speak at a Bitcoin
conference, where he said that if he was elected, he would fire
the head of the SEC and appoint someone who will build the
future, not block the future. He even promised to create a
strategic crypto reserve, whatever that is, saying that
the United States will be the crypto capital of the planet, I
guess overtaking El Salvador. But no, it's not just Trump.
According to Bloomberg, while lots of money has gone to
Republicans, the majority of the money from the crypto industry
has been spent on influencing Democrats.
Republicans are not too happy about this.
A GOP strategist involved in Senate races told NBC that the
spending on Democrats risks hurting Trump since his allies
are being attacked instead of picking a side in the election.
The crypto industry has put together a super PAC with no
focus other than advancing the interest of crypto corporations.
They've raised a massive sum of money.
That's sending the message to politicians that if they commit
to advancing pro crypto policies, they'll get help, and
if they oppose the industry, it could end their political
careers. This spending has been effective
too. In the primaries earlier this
year, crypto PAC backed candidates were big winners.
According to the data, out of 42 primary races where crypto
backed super PAC's intervened, their preferred candidate won
86% of the time. Politicians are bending to the
will of the crypto industry too. The American Prospect reports
that both beneficiaries of crypto campaigns spending and
their opponents, the ones who have received no help, are
desperately endorsing crypto. Hours before Trump's speech at
the Nashville Bitcoin conference, a group of 14
Democratic lawmakers released an open letter to the DNC urging
them to endorse cryptocurrency policies that would support the
crypto industry. All 14 signatories appear to
have received support from crypto super PACs.
A few weeks after the open letter was published, Vice
President Harris gave a speech saying that it's important for
the United States to maintain its dominance in blockchain
technology. Her campaign policy document,
under a heading of sectors that are critical for our economic
and national security, included the suggestion of investing in
technologies like digital assets.
The Washington Post reported last week that she's signalling
support for the expansion of the cryptocurrency industry and was
rebuffing claims that she would seek a crackdown on the sector.
In a separate article, they reported that she promised
donors in New York City a safer business environment for digital
assets. Mark Cuban, who's described in
the press as one of Kamala Harris's most influential
political surrogates, told guests at a fundraiser last week
that Harris's team opposes regulation through litigation
and suggested that Gary Gensler could be removed from his role
at the SEC if Harris is elected. Cuban noted that Harris''s team
used no uncertain terms to express their lack of support
for the Secs current approach to Regulation C against their.
You leaving is worth a point in GDP growth he finished up with.
So who is behind these massive political donations?
Why are Americans seeing so many campaign commercials paid for by
the crypto industry that never get around to mentioning crypto?
And is it true, as the crypto industry claims, that 50 million
Americans own crypto currencies and that it's legal treatment is
one of American voters top concerns?
It seems like no time since our screens were filled with
celebrities and influencers pitching crypto and crypto
exchanges. The most memorable example being
the Larry David FTX Super Bowl commercial, which even featured
P Diddy's roommate's father, Joseph Bankman.
In the wake of the collapse of FTX, lawsuits were launched
against the celebrities and influencers who had promoted it.
Sam Bankman freed Puffy's roommate, stood trial last year
on a long list of charges. But some of the charges, like
conspiracy to make unlawful campaign contributions,
conspiracy to bribe foreign officials and two other
conspiracy counts, were held back for a second trial because
these charges had not been approved as part of his
extradition from the Bahamas. Those charges were supposed to
be brought at a second trial that should have occurred this
year. Last December, the prosecutors
told the judge that evidence at a second trial would duplicate
evidence already shown to a jury, also saying that a follow
up trial would ignore the strong public interest in a prompt
resolution of the case, particularly because victims
would not benefit from forfeiture or restitution in
orders if sentencing was delayed.
Now, it can be argued that there might have been massive public
benefit associated with hearing testimony about the $40 million
that SBF handed out to politicians and political action
committees ahead of the 2022 midterm elections and what he
expected in return. While federal election receipts
showed that SBF donated almost entirely to Democrats, guided by
his mother, Barbara Freed, in an interview with Tiffany Fong, he
claimed to have made significant dark or undisclosed donations to
Republicans, too. None of this was explored in
court. Celebrities, it turns out, took
more heed for accepting advertising money from FTX than
politicians did for accepting donations.
The original indictment stated that he leveraged his influence
that his contributions bought him to lobby Congress and
regulatory agencies to support legislation and regulation that
he believed would make it easier for FTX to continue to accept
customer deposits and grow. We recently saw news of Ryan
Salami and Caroline Ellison being sentenced to prison time
for their participation in the massive fraud at FTX, but
there's no news about any prosecutions relating to the
massive campaign finance fraud that occurred.
That seems like quite an omission.
So if crypto makes up for almost half of all corporate political
contributions in this election cycle, who are the donors?
According to the consumer advocacy group Public Citizen,
crypto sector corporations, primarily Coinbase and Ripple,
have dumped over $119,000,000 in real money, not meme coins, into
the 2024 election so far, almost entirely into super PAC's
dedicated to elevating pro crypto candidates and attacking
crypto skeptics. Fair Shake, Defend American Jobs
and Protect Progress make up a network of super PACs funded by
the crypto industry. Fair Shake is listed as being
nonpartisan. It's affiliated super PAC
Protect Progress supports Democrats and Defend American
Jobs supports Republicans. According to data from The
Washington Post, all three received funding from the same
crypto industry donors. Fair Shake has raised over $200
million and its biggest donors by far were Coinbase and Ripple,
with large donations also coming from the founders of the venture
capital firm Andreessen Horowitz, $5,000,000 came from
the Winklevoss twins who run the Gemini exchange, and $1 million
came from Coinbase CEO Brian Armstrong.
According to news reports, almost all of these donors have
had run insurance with securities regulators due to
their crypto related activities. The crypto industry denies that
its involvement in US elections is a problem.
The Fair Shake website writes of the need to support innovators
building the next generation of the Internet and argues that a
clearer regulatory and legal framework is vital if the
broader open blockchain economy is to grow to its full
potential. According to Logan Dobson of the
lobby group Stand With Crypto, who spoke with The Hill earlier
this month, the crypto voter is real, bipartisan, and ready to
engage this cycle. Amusingly, Bloomberg reported
this summer that the Winklevoss twins, Harvard's dumbest
graduates, had their money sent back to them after their Bitcoin
donations to Trump's presidential campaign exceeded
the maximum limit allowed under federal law.
The Winklevoss twins run the crypto exchange Gemini, many of
whose users spent months trying to get back funds they invested
in a program called Gemini Earn. The exchange agreed to refund at
least $1.1 billion to its customers and pay a $37 million
fine earlier this year following a settlement with the New York
Department of Financial Services.
As embarrassing as all of this should be for them, the great
thing about being a twin is that you get to claim that whenever
you did something stupid that the other one did it.
I think at this point they should probably claim to be
triplets and all of the dumb stuff was done by Billy
Winklevoss. Then look around and say where's
he gone now? One of the claims made by crypto
insiders is that crypto is owned by at least 50 million
Americans. The claim is that it's a general
interest group rather than a special interest group.
Federal Reserve data shows that this is not the case.
The most recent data shows that 7% of Americans, or 18 million
people held or used cryptocurrency last year.
This is down 2% from the prior year and only 1% of Americans
actually used crypto to buy something or make a payment last
year, and it's use for payments was high based amongst lower
income adults and the unbanked. Crypto appears nowhere in any of
the surveys measuring voters top concerns.
If we look at the ownership of Bitcoin as a representative
cryptocurrency, approximately 29% of all mined bitcoins are
estimated to have been lost forever, and 60% of Bitcoin are
held in fewer than 7000 wallets, implying that a small number of
people care a lot about the price of Bitcoin, and the
majority of people have little interest at all.
Politicians are cozying up to the crypto industry not because
it represents a significant portion of the voting public,
but simply because of the amount of money being thrown around.
The reason that none of the adverts paid for by the crypto
industry mention crypto currencies at all is that the
advertisers know that the public either don't care about this
issue whatsoever, or that they would be turned off by an advert
sponsored by an industry that's been plagued with legal problems
and accusations of fraud. The crypto super PACs have names
like Protect Progress and Defend American Jobs rather than NFT
Hodlers for Harrison, meme coin pumpers for Trump for fairly
obvious reasons. At least when you see a
political advert paid for by the oil industry, they're open about
their self-interest, warning voters that a particular
politician's policies might push up the price of energy.
Disclosing the true purpose of the crypto funded adverts would
likely be toxic for those who took money from them.
Jillian Ted in the FT highlighted in a recent column
that all of this political lobbying seems to contradict the
mantra of the digital assets world, that crypto is a tool
that would enable citizens to challenge the establishment and
that it was meant to be the antithesis of the Washington
swamp. Molly White, a prominent crypto
critic, wrote on her blog this summer that Coinbase may have
violated campaign finance laws with its super PAC donations.
Campaign finance law prohibits federal government contractors
from making contributions or promising to make contributions
to political entities, including super PACs like Fair Shake.
White argues that Coinbase began a contract in July with the US
Marshals Service for asset forfeiture and that as a federal
contractor, they are not permitted to make these
contributions. Because Coinbase first sought
the contract in March and gave Save $25 million to Fair Shake
in May, She says that their donation is the largest illegal
campaign contribution by a federal contractor in U.S.
history, the second having been for $1 million.
Coinbase has since denied that their contribution was illegal,
arguing that they are not a federal contractor because the
US Marshall Service contract is not funded by appropriations,
but by asset forfeiture funds. The consumer advocacy group
Public Citizen rejects that argument, saying that the
creation of the Asset Forfeiture Fund itself was an
appropriation. I asked Zeke Fox, the author of
Number Go Up, who's appeared on this channel in the past, about
his thoughts on whether politicians should get in bed
with the crypto industry and on the industry's relevance to
regular American voters. Here's what he had to say.
I can't. Believe these politicians are
going full crypto again. The other day Maxine Waters,
influential Democrat, said blockchain was the future.
The future. That's what crypto Bros have
been saying for literally a decade at this point.
They've yet to come up with anything useful to do with
crypto. Don't these politicians remember
the last person from the crypto industry who came to DC bearing
campaign contributions? Sam Bankman.
Freed. He was running a giant scam.
And what about all the ways that crypto is facilitating crime?
Ransomware. It's shut down hospitals, It's
grounded flights. It wouldn't be possible without
crypto and then you got pig butchering scams.
Americans are losing billions of dollars to those every year.
Cryptos helping Russia move money to evade sanctions.
Chinese fentanyl suppliers are using it for their money
laundering purposes, and the industry is still completely
rife with ponzi's and pump and dumps.
The biggest crypto donors are companies like Coinbase that are
facing lawsuits from the SEC that could potentially put them
out of business. Plus you got the venture
capitalists like A 60 and Z who invested in those companies.
Rather than comply with the existing securities laws,
they're lobbying for looser ones and they're trying to get a
friendly chairman of the SEC installed.
Honestly, it appears like this influence buying campaign is
going pretty well for the crypto industry.
They definitely have tons of money.
After all, they're in the business of selling made-up
coins for real cash. It's pure profit I.
Can't find the exact source, but a while back Joe Wiesenthal
joked that buying gold instead of stocks was one of the most
bearish bets a person could make, describing it as a bet
that a rock would generate more wealth than human effort would.
He went on to joke that cryptocurrencies were maybe
worse, as at least gold has industrial uses and doesn't
require a computer running forever to preserve of its
existence. Hopefully I'm not misquoting
him. While many crypto investors
think of crypto as a hedge against inflation or as some
sort of digital gold, the reason you might expect it to hold its
value or even grow in value in the coming years is because of
its importance to criminal organizations in storing, moving
and laundering money. If you believe that large scale
criminality is likely to grow in the coming years, it might be
reasonable to expect cryptocurrency prices to rise as
this is a big driver of its demand.
It's been quite some time since we've heard crypto enthusiasts
making any sort of claim of use cases for crypto.
The closest thing to those claims today is the idea that
the price should go up because of ETF money inflows.
After years of scandals, exchange hacks, Ponzi schemes,
and repeated frauds, crypto is finally facing a real
existential crisis in the United States, not because of its
price, but because it appears that regulators are finally
waking up. According to the SEC, most
crypto currencies qualify as unregistered securities
offerings, and they've been pursuing enforcement against the
exchanges for illegally offering these to the the public.
The crypto industry would much rather be regulated by the CFTC,
a significantly smaller and more poorly funded Regulatory agency
who they believe would take it easier on them.
This is possibly why both presidential candidates are so
vocal about how they would replace Gary Gensler.
Not for his lack of enforcement, which has allowed ordinary
Americans to lose fortunes to crypto fraud over the last few
years, but because their financial backers are
complaining about heavy-handed enforcement.
The heavy-handed enforcement argument is pretty hard to
believe when almost every big name celebrity seems to have
been involved in promoting crypto Ponzi schemes in recent
years, and I don't think any of face real legal consequences
despite ripping off their fan bases in clear public view.
After a Kamala Harris speech at the Economic Club of Pittsburgh,
Mark Cuban, an outspoken cryptocurrency advocate, told a
Fox News reporter that if he was to join the Harris
administration, it would be to replace Gary Gensler as SEC
chair, a rather disturbing idea from the perspective of investor
protection. Governments, regulators, and law
enforcement generally dislike cryptocurrency because it makes
it extremely difficult to enforce laws, laws that most
members of society think are worth enforcing.
It's hard to understand how a politician could accept support
from this industry while claiming to be tough on crime,
but they do this anyway because they don't want to turn their
back on almost half of the corporate political
contributions available. Since I learnt the scale of
these political contributions, I've started paying more
attention to the footnotes at the bottom of political adverts
that I've been seeing on YouTube.
You can click on the little I near the bottom of an advert to
get more information on who paid for it.
Over the last week, I've been seeing the same advert over and
over again for a candidate running for Senate.
He brings up all of the big topics that voters might care
about with no mention of Crips, but it turns out that the advert
was of course paid for by Protect Progress, a crypto super
PAC. It's quite possible that there
is a candidate that you think is terrible after seeing all of the
attack adverts against them, but maybe they're not nearly as bad
as you thought. Maybe they just said something
that doesn't suit the needs of the crypto industry and all of
the money in the world is being spent on shutting them down.
I hope that even if you are a crypto investor that you find
this video interesting and that you are possibly disturbed that
a group of businesses that have been in constant trouble with
the law and had to pay fines for misleading customers, losing
their money and abusing their trust make up almost half of all
corporate political contributions in this election
cycle. Maybe it's time we stopped
blaming everything on Billy Winklevoss and paid attention to
why every politician is suddenly pro crypto out of nowhere.
Thanks for tuning into this week's podcast.
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to a friend as podcasts generally grow through word of
mouth. Have a great week and talk to
you again soon. Bye.
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