FTX asks politicians to return campaign donations, threatens lawsuits

Yahoo Finance Live anchor Dave Briggs breaks down legal arguments for potential FTX lawsuits.

Video transcript

[AUDIO LOGO]

DAVID BRIGGS: So now bankrupt FTX is asking politicians to return donations given to them by Sam Bankman-Fried. In a statement on Sunday, FTX directs donation recipients to return the money by February 28. And if that money is not returned, FTX says it will sue the politicians.

So who are they? And how much cheddar are we talking here? Bankruptcy attorneys say FTX donated $93 million to politicians. SBF contributed $70 million himself to mostly Democratic campaigns. Bankman-Fried telling YouTuber Tiffany Fong that he also donated an equal amount to Republicans, but all those donations were, quote, "dark," therefore untraceable.

All this begging a very important question. Dear Sam Bankman-Fried-- is it polite to donate money and then ask for it back and threaten to sue if I don't get the funds? No, it's not. Brendan Fischer, deputy executive director of Documented and an expert in campaign finance issues says, "If prosecutors prove that former FTX execs illegally used customer funds to make straw donations-- that is, they illegally made donations in their own names using FTX customer funds-- then the politicians who received those donations could be required to give them back."

We spoke to another expert. He's Terence Yang, managing director at Swan Bitcoin, also a graduate of Harvard Law, perhaps you've heard of it. He tells me FTX may have grounds to sue under a law prohibiting constructive fraudulent conveyances-- that's if FTX can prove it was already insolvent at the time of the transfers or made insolvent because of the transfers. Mr. Yang adding FTX, in his estimation, has an 80% chance of winning and recovering some of the 80% of those donations.

One better hope he's right. These lawsuits could cost tens of millions of dollars, money FTX and its defrauded customers do not have. These politicians should return the money voluntarily. They do have a moral and, obviously, a legal obligation in this case.

In some instances, though, it may have been their own constituents who lost millions of dollars here. We're going to make you, Seana, the judge. Should they return this money voluntarily or force the legal process here? And how do you factor in if you gave that money to a charity?

SEANA SMITH: Well, exactly. Yeah, it's very complicated. Yes, obviously, I think they should give the money back if they still have the money. If they donated the money to charity, which there were lots of reports that the politicians had already done so with that, it's going to be impossible or very hard to get that money back.

You're going to feel awful asking a charity to return the donation. So then you're coughing up your own money, which you probably don't have. So this is very, very complex, as you can tell by how you just laid it out there.

DAVID BRIGGS: $93 million.

SEANA SMITH: Yeah.

DAVID BRIGGS: Another problem is those Republicans who received, theoretically, tens of millions of dollars, it is untraceable because it was dark money, what do you do about them? Is there any way to trace it? I assume there is not. But they are looking for it in bankruptcy court.

SEANA SMITH: You would think that there would be no way for them to trace it, but we will find out, I'm sure.