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The Crypto Titans’ $160 Million War Chest Threatens Senate Democrats
(Bloomberg) — Cryptocurrency billionaires and their allies have amassed a $160 million war chest to protect their fortunes, backing U.S. candidates who favor light regulation of the troubled industry.
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The staggering sum makes the cryptocurrency industry one of the most influential players in federal campaign finance. It’s the kind of money that has already proven it can ruin California’s Senate race. In November it could be crucial to handing over the Senate majority to the Republicans.
Democratic control of the Senate hinges on the re-election of Banking Chairman Sherrod Brown of Ohio Jon Tester of Montana, both cryptocurrency skeptics and with enormous influence on the fate of the crypto titans’ key legislative goals. They are also the only two Democrats in office this year in states won by Donald Trump in the last election, making them prime targets for Republicans.
Fairshake, the cryptocurrency industry’s political action committee, and allied groups have nearly doubled their funding in recent weeks after receiving $25 million each from Ripple Labs, venture capital firm Andreessen Horowitz and Coinbase Global Inc. I billionaire twins Cameron Winklevoss AND Tyler Winklevosswho co-founded cryptocurrency exchange Gemini, contributed $4.9 million earlier this year.
CEO of Coinbase Brian Armstrong, whose estimated net worth has surged 50% this year as the cryptocurrency market rebounds to $10.8 billion on Thursday, urged his followers last week to vote for lawmakers of both parties that do not support digital assets. Armstrong traveled to Capitol Hill this week to meet with more than a dozen senators from both parties. Tester was on the list, and he later said he wanted to talk to other senators about a cryptocurrency regulation bill.
Faryar Shirzad, Coinbase’s chief policy officer, said the company does not control Fairshake and has tasked the PAC with pushing the industry’s agenda in elections.
“We have learned as an industry that you need to show up politically to be heard,” he said. “We are very, very committed to making it happen. We are very busy in this cycle and beyond. This is just the beginning of a long journey.”
Regulatory objectives
Cryptocurrency giants want to reduce oversight by the Securities and Exchange Commission, which has sued many major crypto operators and imposed heavy fines. Gary Gensler, the agency’s president, said the industry is riddled with fraud and that exchanges do not adequately safeguard their customers’ assets and often mix them with their own funds.
Platforms like Coinbase, which the SEC sued last year for allegedly violating securities laws, have a lot to lose if the regulator’s position holds. The SEC alleges that Coinbase made billions of dollars by illegally promoting the sale of securities and also failed to register as required as an exchange, broker, and clearing house.
Fairshake spokesman Josh Vlasto said this week that the super PAC is keeping an eye on both Brown and Tester’s reelection races, although it has not committed to spending on either race. Earlier this year, Kristin Smith, CEO of the trade group Blockchain Association, said the industry would watch how Brown handles the cryptocurrency legislative agenda.
The Democratic-led Senate has so far failed to follow up on the package of industry-friendly regulations, which the Republican-controlled House passed in May.
Michigan Democratic Sen. Debbie Stabenow, who met with Armstrong this week, said she is working with senators on legislation to address the regulation of cryptocurrencies by the Commodities Futures Trading Commission, the preferred cryptocurrency regulator.
Majority Leader Chuck Schumer supports this effort, calling it “sensible regulation.”
Heavy expenses
Fairshake spent $10 million ahead of California’s open March Senate primary to pummel progressive Rep. Katie Porter, a crypto-skeptic Democrat, with negative ads before her defeat. A TV ad called the congresswoman a fake and a skilled actress as words about her being a bully, a liar and unfit flashed across the screen. The ads did not mention cryptocurrencies.
The high-visibility election influence campaign represents a notable evolution from a year ago, when the cryptocurrency industry was reeling from a barrage of scandals and corporate failures, including the implosion of trading giant FTX in late 2022.
Former FTX CEO Sam Bankman-Fried built significant political influence in Washington with tens of millions of dollars in donations during the 2022 elections. He was found guilty of a series of crimes related to his management of FTX and sentenced in March to 25 years in prison.
The consequences of his political donations continue. Just last month, a federal judge sentenced one of his top deputies to more than seven years in prison for making millions in political donations while at FTX, drawing on loans from Alameda Research and acting as a straw donor for Bankman-Fried .
The cryptocurrency market has rebounded this year thanks largely to U.S. regulators’ approval of Bitcoin exchange-traded funds in January, attracting more investors to the most popular cryptocurrency.
Choose sides
Armstrong recently touted a cryptocurrency advocacy website, which gave Brown an “F” grade and recommended Brown’s Republican opponent, Bernie Moreno, a longtime cryptocurrency advocate who founded a securities firm based on blockchain. The website gives Tester a mediocre “C”.
Brown and Tester are feeling the pressure. Both senators bristled last week when asked about the issue, with Brown repeatedly saying he has spoken to reporters enough about cryptocurrencies and that he won’t negotiate with the press.
Tester, a frequent ally of the banking industry, said he remained fairly neutral on cryptocurrencies. “When I fully understand it, then we will deal with it,” he said.
Moreno, meanwhile, has courted the industry with his cryptocurrency expertise. “I’m facing the most anti-crypto guy in America,” he said at a recent CoinDesk conference in Austin, Texas.
Tester’s Republican opponent, Tim Sheehy, criticized the Montana senator in posts on X, accusing Tester of trying to kill cryptocurrencies. Sheehy called Bitcoin and Cash “FREEDOM money.”
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CNBC Crypto World features the latest news and daily trading updates from the digital currency markets and gives viewers a glimpse of what’s to come with high-profile interviews, explainers and unique stories from the ever-changing cryptocurrency industry. On today’s show, Ledn Chief Investment Officer John Glover weighs in on what’s driving cryptocurrency prices right now and how the potential approval of spot ether ETFs could impact markets.
According to CryptoQuant, blockchain data shows signs that the Bitcoin mining industry is “capitulating,” a likely precursor to Bitcoin hitting a local price bottom before reaching new highs.
CryptoQuant analyzed metrics for miners, who are responsible for securing the Bitcoin network in exchange for newly minted BTC. As outlined in the market intelligence platform’s Wednesday report, multiple signs of capitulation have emerged over the past month, during which Bitcoin’s price has fallen 13% from $68,791 to $59,603.
One such sign includes a significant drop in Bitcoin’s hash rate, the total computing power that backs Bitcoin. After hitting a record high of 623 exashashes per second (EH/s) on April 27, the hash rate has fallen 7.7% to 576 EH/s, its lowest level in four months.
“Historically, extreme hash rate drawdowns have been associated with price bottoms,” CryptoQuant wrote. In particular, the 7.7% drawdown is reminiscent of an equivalent hash rate drawdown in December 2022, when Bitcoin’s price bottomed at $16,000 before rallying over 300% over the next 15 months.
This latest hash rate drop follows Bitcoin’s fourth cyclical “halving” event in April, which cut the number of coins paid out to miners in half. According to CryptoQuant’s Miner Profit/Loss Sustainability Indicator, this has left miners “mostly extremely underpaid” since April 20, forcing many to shut down mining machines that have now become unprofitable.
CrypotoQuant said that miners faced a 63% drop in daily revenue after the halving, when both Bitcoin block rewards and transaction fee revenues were much higher.
During this time, Bitcoin miners were seen moving coins from their on-chain wallets at a faster rate than usual, indicating that they may be selling their BTC reserves“Daily miner outflows reached their highest volume since May 21,” the company wrote.
Among the sales of Bitcoin miners, whales and national governmentsBitcoin’s price drop in June also hurt Bitcoin’s “hash price,” a metric of Bitcoin Miner Profitability per unit of computing power.
“Average mining revenue per hash (hash price) continues to hover near all-time lows,” CryptoQuant wrote. “Hashprice stands at $0.049 per EH/s, just above the all-time low hashprice of $0.045 reached on May 1st.”
By Ryan-Ozawa.
US lawmaker French Hill has noted that Donald Trump will take a more pro-crypto approach than the current administration. The run-up to the presidential election has seen cryptocurrencies become an issue with lawmakers making huge statements ahead of the polls. Donald Trump has also been reaching out to the industry, making a pro-crypto case.
French Hill Backs Trump’s Pro-Crypto Stance
Republican Congressman French Hill has explained the type of cryptocurrency regulatory framework he believes Donald Trump could adopt in the country. In a recent interview with CNBC, French Hill said that the recently passed FIT21 bill is the type of regulatory framework the Trump administration will adopt in the sector.
#FIT21 passed the House with 71 Democratic votes, it’s exactly the kind of digital asset regulatory framework former President Trump would support if re-elected.
See more on @SquawkCNBC
photo.twitter.com/ceTmU4LApU
— French Hill (@RepFrenchHill) July 3, 2024
THE FIT21 Bill It is intended to protect investors and consumers in the market by establishing clear rules and powers for the various regulators in the sector. According to Hill, Trump will adopt it because it directs the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) on the specific regulatory framework needed in the market.
“… for people who are innovating and starting a crypto token, a related business, custody of those assets, how to ensure consumer protection, so I think that framework is the right approach and that’s what I’m going to recommend to the President to pass, which is that we have not passed it between now and the end of this Congress.”
He also called Trump an innovative and pro-growth president in financial matters.
Cryptocurrency is going mainstream
This election cycle saw the cryptocurrency industry taking a place in mainstream issues following broader adoption across demographics. From candidates moving toward enthusiasts to recent pro-Congress legislation, cryptocurrencies have become a rallying point for officials. The U.S. regulatory landscape has been criticized for stifling growth due to frequent SEC LawsuitsThis has led executives to push for pro-cryptocurrency laws and raise money for pro-industry candidates.
Read also: Federal Reserve Predicts “AI Will Be Deflationary” to Stimulate Economy
David is a financial news contributor with 4 years of experience in Blockchain and cryptocurrency. He is interested in learning about emerging technologies and has an eye for breaking news. Keeping up to date with trends, David has written in several niches including regulation, partnerships, cryptocurrency, stocks, NFTs, etc. Away from the financial markets, David enjoys cycling and horseback riding.
A federal court has ordered Jafia LLC and its owner, Sam Ikkurty, to pay nearly $84 million to cryptocurrency investors after ruling that the company was operating a Ponzi scheme.
The ruling, issued by Judge Mary Rowland in the U.S. District Court for the Northern District of Illinois, follows a lawsuit filed by the Commodity Futures Trading Commission (CFTC) in 2022 after the fund collapsed.
Judge Rowland found that Ikkurty, based in Portland, Oregon, did numerous false claims on his company’s hedge funds.
These included misleading statements about his trading experience and the promise of high and stable profits. Instead, Ikkurty used funds from new investors to pay off previous investors, a hallmark of a Ponzi scheme.
The Ponzi Scheme
The court found that Ikkurty misappropriated investment funds for personal use without the knowledge of the investors. These funds were used for personal use and were reported as Fraudulent Investmentscausing significant financial losses to customers.
This non-transparent operation violated Transparency Commission regulations, which led to the imposition of a hefty fine to compensate defrauded investors and restore some public confidence in the financial system.
Judge Rowland emphasized that fraudulent activity such as this violates the law and undermines the integrity of modern financial markets. The $84 million award seeks to address the financial harm inflicted on investors and reinforce the importance of legal compliance in cryptocurrency trading.
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