The younger brother caught in the middle of the FTX investigation

The money flowed freely at a pandemic-prevention organization run by the younger brother of Sam Bankman-Fried, the disgraced cryptocurrency mogul.

Just over $375,000 financed a failed campaign in Colorado to increase taxes on cannabis sales in order to support pandemic research. Another $1 million was spent on consulting and advertising expenses in a single year. And $3.3 million went toward the purchase of a luxurious town house a few blocks from the U.S. Capitol.

The group, Guarding Against Pandemics, raised more than $22 million in its first full year in 2021, turning it into an overnight lobbying force in Washington. The group’s founder, Gabe Bankman-Fried, a former legislative assistant, started getting the rock star treatment: two White House meetings with senior staff and invitations to speak on panels with government officials.

But almost all the money raised by Guarding Against Pandemics appears to have come from Gabe Bankman-Fried’s brother, whom federal prosecutors have accused of misappropriating billions of dollars from customers of his crypto exchange, FTX. The collapse of FTX prompted federal authorities to investigate allegations that sweeping fraud drove the exchange into bankruptcy in November, as well as potential campaign finance law violations by both brothers.

Federal prosecutors in Manhattan have charged Sam Bankman-Fried, 31, with orchestrating a scheme to evade limits on corporate political donations. Prosecutors have said he recruited FTX executives and others to serve as proxies for the crypto exchange and make tens of millions of dollars in illegal political donations using customer money.

Authorities are investigating whether Gabe Bankman-Fried, 28, and some of his colleagues were part of the same so-called straw donor scheme, five people familiar with the matter said, speaking on the condition of anonymity. And they are trying to determine whether he knew some of the funds that his organization received had been misappropriated from customers.

Last month, a top FTX executive, Nishad Singh, pleaded guilty to using company money to make millions of dollars in straw donations to Democratic campaigns and committees. Another executive, Ryan Salame, whose political action committee hosted a happy hour at Guarding Against Pandemics’ Washington town house last year, is also under scrutiny over the tens of millions of dollars he contributed to Republicans.

The flood of contributions was part of an effort by Sam Bankman-Fried to portray himself as one of the few honest brokers in the freewheeling crypto world and gain influence with regulators and lawmakers.

It’s unclear whether his brother or his brother’s organization did anything wrong in connection with this effort. At least four political consultants who worked with Gabe Bankman-Fried have retained lawyers, and several Guarding Against Pandemics advisers have received subpoenas, people briefed on the matter said.

“The brother is legally responsible to make every effort to verify where the funds came from,” said Craig Holman, a government affairs lobbyist for the progressive nonprofit Public Citizen. “But if Sam Bankman-Fried kept him entirely in the dark and said, ‘It is just coming from me,’ it is going to be difficult to imply criminal activity by the brother.”

Michael Tremonte, a lawyer for Gabe Bankman-Fried, said his client was “proud of the work he did at Guarding Against Pandemics in trying to raise awareness of a critical issue” and “always worked to ensure the funding was proper.”

The relationship between the Bankman-Fried brothers has not always been an easy one.

After graduating from Brown University in 2017, Gabe Bankman-Fried went to work at Jane Street Capital, the Wall Street trading firm where his brother had cut his teeth. But his stay was brief and a little awkward, partly because his brother had recently left and proceeded to recruit Jane Street staff to join a rival trading firm he founded, two people familiar with the matter said.

At times, the people said, the brothers went for extended periods without talking much.

The task of spending FTX’s money on politics and philanthropy brought them together. Gabe Bankman-Fried began working on Guarding Against Pandemics in the summer of 2020, as COVID-19 was spreading across the United States. On trips to Washington, Sam Bankman-Fried would stay at his brother’s house, three people familiar with the arrangements said.

For much of its existence, Guarding Against Pandemics was something of a slapdash operation, with a small staff handling an enormous influx of funding.

Gabe Bankman-Fried incorporated the group in Delaware as a 501(c)(4) nonprofit — a tax-exempt organization that is permitted to engage in some political campaign activity and make political donations.

Under federal tax law, this kind of nonprofit is supposed to file a form with the IRS, stating that it will function as a tax-exempt entity, within 60 days of its creation. But Guarding Against Pandemics did not file that form until February 2022, according to documents reviewed by The New York Times. And because it classified itself as a 501(c)(4), the group didn’t have to disclose detailed information about its donors to either the public or the IRS.

Jeffrey Tenenbaum, a lawyer who specializes in nonprofit law, said it was “problematic” that Guarding Against Pandemics had waited over a year to file the required form. The IRS can fine organizations for not complying.

The latest tax filing that Guarding Against Pandemics submitted to the IRS was for 2021, so it’s unclear how much money the group raised or spent last year. The 2021 filing showed $11 million in expenses, including $3.5 million in grants to several groups.

The Bankman-Fried brothers relied on a small set of political consultants to guide their spending, applying the principles of effective altruism, the philanthropic movement that has a large following in the tech industry. A top adviser to both brothers was Michael Sadowsky, a committed effective altruist who had worked with the younger Bankman-Fried at the data firm Civis Analytics.

Last year, Sadowsky helped start a political action committee, Protect Our Future, with a mission similar to that of Guarding Against Pandemics. Protect Our Future also used some of the same vendors that a PAC affiliated with Guarding Against Pandemics did, including the Money Wheel, a Phoenix firm that offers compliance and accounting services.

With a $25 million cash infusion from Sam Bankman-Fried, Sadowsky’s PAC became an instant force in Democratic politics. His group supported dozens of progressive candidates and got widespread attention when it spent more than $11 million on an unsuccessful House primary candidate in Oregon, an astonishing sum for such a race.

But Sadowsky also had rough edges. Colleagues privately chided him for using coarse, sometimes explicitly transactional language in written communications about donations, three people familiar with the matter said.

A recent court filing by the prosecutors investigating FTX said an unnamed political consultant had told Singh, the company executive, that “you being the center left face of our spending will mean you giving to a lot of woke” stuff for transactional purposes, adding an expletive. Several former colleagues said they had assumed the consultant was Sadowsky, and a person with knowledge of the conversation confirmed that it was him.

William Farah, a lawyer for Sadowsky, said his client has not been accused of any wrongdoing and had no knowledge of anyone’s being reimbursed for making political contributions. He said Protect Our Future was advised by lawyers and a compliance firm.

Another adviser who worked closely with Gabe Bankman-Fried was Keenan Lantz, a top executive at Guarding Against Pandemics who helped handle paperwork for political donations and other operational matters, said two people familiar with his role. Lantz was hired to bring order and professionalism to a chaotic operation, one of the people said, and is now the group’s executive director.

Representatives for Lantz declined to comment.

Two other key figures in the Bankman-Frieds’ political network had ties to prominent Democrats: Jenna Narayanan, a former political adviser to billionaire investor Tom Steyer, and Sean McElwee, the founder of Data for Progress, a progressive think tank.

McElwee and a lawyer for Narayanan declined to comment.

Despite its near-limitless bankroll, Guarding Against Pandemics made some significant missteps even before FTX’s collapse.

Before the 2021 elections, the younger Bankman-Fried and his associates came up with a plan to fund pandemic prevention: a ballot measure in Denver that would raise taxes on retail cannabis sales to finance pandemic research at the University of Colorado Denver’s CityCenter. Guarding Against Pandemics spent $375,700 to support the ballot initiative.

But the proposal was easily defeated. The campaign surprised officials at the University of Colorado, which declined to take a position on the ballot measure. And the group’s advocacy fueled intense opposition in the local marijuana industry.

“They just sort of showed up one day,” said Truman Bradley, who runs a cannabis group in Colorado.

The collapse of FTX in November effectively ended Guarding Against Pandemics, which Lantz is winding down. Most of the group’s employees have left, and the town house is up for sale.

Gabe Bankman-Fried hasn’t commented publicly, but he has stayed in touch with a small circle of friends and colleagues. In private conversations, he has confided that he’s most concerned about the impact of the investigation on his parents, who are professors at Stanford Law School, according to someone close to him.

“He wasn’t panicking or losing his mind,” said Peter Buckley, another friend. “He on at least one occasion managed to find some gallows humor in the whole thing.”