The Next S.B.F. Legal Riddle: What’s in Puerto Rico?

A new federal investigation suggests that the political and campaign-finance elements of the S.B.F. case may be broader than originally known.
A new federal investigation suggests that the political and campaign-finance elements of the S.B.F. case may be broader than originally known. Photo: Gotham/GC Images
Theodore Schleifer
February 21, 2023

An elite team of federal investigators are looking into possible campaign-finance violations by Sam Bankman-Fried or his associates in what appears to be an expansion of the Justice Department investigation into the sprawling FTX scandal, according to sources briefed on the matter. The Public Integrity Section, a SWAT team of sorts within the D.O.J. that focuses on crimes by public officials, recently issued at least one grand jury subpoena in Puerto Rico, I’m told by a source. The existence of this additional grand jury, empaneled in San Juan, raises the possibility that there could be more indictments involving S.B.F. or his inner circle in the coming weeks.

Details are still scarce about the twists in this matter. But multiple people involved in the case recently said they were informed of Public Integrity’s engagement in Puerto Rico, which hasn’t previously been reported. To date, the only known criminal investigation comes from the Southern District of New York, which in December indicted S.B.F. on eight counts of fraud, including one count of campaign-finance violations. U.S. Attorney Damien Williams briefly name-checked the Public Integrity office and “expressed appreciation” for their assistance when the indictment was announced, in early December. At the time, that struck legal observers as a mere formality, given that Public Integrity is often at least consulted on campaign-finance matters. Now it appears that the office has taken on a larger role, or has opened a separate investigation. 

Either way, the involvement of the integrity division suggests that the political and campaign-finance elements of the S.B.F. case may be broader than originally known, and could involve crimes perpetrated well beyond New York, legal experts and Public Integrity alumni tell me. Representatives for the Justice Department, the U.S. Attorney’s Office in Puerto Rico, and the F.B.I. field office in Puerto Rico all declined to comment.

Nevertheless, some defense attorneys involved in the case might welcome the involvement of the Public Integrity Section, which specializes in campaign finance matters and might be more sophisticated in its treatment of their clients. While two of the lead prosecutors in New York, Nick Roos and Andrew Rohrbach, have experience prosecuting public corruption cases that touch on campaign finance issues, some former S.B.F. allies and associates fear getting swept up in the public spectacle. If the campaign-finance case is being investigated separately, these people hope, perhaps they will understand how modern campaign fundraising works and treat them as witnesses rather than potential targets or subjects.

What’s in Puerto Rico?

The potential existence of multiple overlapping inquiries was always bound to complicate the S.B.F. legal saga, which has been probed by an alphabet soup of agencies including the D.O.J., F.B.I., S.E.C., C.F.T.C., and now the Public Integrity Section (P.I.N.). It’s unclear, for instance, how a federal investigation prosecuted by so-called “Main Justice” could influence the prosecution by S.D.N.Y.—the two entities could collaborate, or perhaps the Southern District could transfer the matter to Main Justice for its own charges, or perhaps there is a way for the two investigations to proceed simultaneously, in parallel. Lawyers who have worked for S.D.N.Y. tell me that the so-called “Sovereign District” would likely be reluctant to cooperate with colleagues at the D.O.J. The Southern District is historically possessive with their cases—they don’t give up the glory easily.

Whether there would be additional charges brought, or prosecuted, in Puerto Rico remains unclear. Public Integrity can, within reason, effectively choose a jurisdiction in which to present evidence before a grand jury before issuing an indictment. As I understand it, FTX had few operations on the island—its home base was in the Bahamas. But Puerto Rico is home to a large expat crypto community, thanks to its zero percent tax rate on capital gains. 

Puerto Rico is also home to Erick Todd, the founder of an FTX-funded dark-money group called Defending America Together, which was referenced in the subpoena, I’m told by a person briefed on it. That entity, which I wrote about last week, made millions of dollars in political contributions to Republican super PACs during the 2022 midterms. Todd didn’t respond to multiple requests for comments and an attorney who has previously represented him declined to answer questions on Tuesday. But Todd is the sole board member of the 501(c)4, which was incorporated in Delaware but lists a Puerto Rican personal mailbox as its address. Todd, a part-time New Hampshire resident, says in the incorporation documents that he “may work remotely from his residence in Puerto Rico.” 

These new details, while illuminating, also suggest just how little we know about this murky, growing campaign-finance scandal. Todd himself hasn’t been accused of any wrongdoing, nor have any of Bankman-Fried’s political allies. Still, there is a pervasive sense of paranoia coursing through Democratic circles over what exactly S.B.F. did and when he did it. Now that the investigation is expanding, their anxiety is surely going through the roof.