When Vultron announced its $22 million funding round earlier this week, the AI startup came to highlight its leading investor, Craft Ventures.
The announcement raised questions about the Trump administration's conflict of interest, in which Sack serves as both AI and Crypto Czar, while maintaining his role in the craft venture.
Sacks was able to secure not one but two ethics exemptions, and shape federal government policies while maintaining economic interests in the very industries he oversees. The first 11-page document from March covers his crypto investments. The second, published in June, deals in particular with his AI Holdings. Together, they have enabled what ethics experts call an unprecedented arrangement.
“It's a graft,” said Kathleen Clark, a law professor at the University of Washington who specializes in government ethics after reviewing the Sachs' code exemption. “This is the lawyer at the White House law firm that has Trump bids. [Sacks] Earn money while insulating him from criminal responsibility. ”
Clark's analysis is important. She points out that the exemption discusses the percentage of Sack's total assets – when signed, his interest in the Kraft's overall portfolio represents less than 3.8% of his total assets (for example), but does not reveal the actual amount. “The fact that this profit is only 3.8% of someone's total assets is when you're talking about law professors. But 3.8% of this guy's assets is a lot of money,” Clark said.
Clark also argues that the exemption does not take into account the potential benefits. Federal regulations require that you look at “potential profits or losses” as well as current value. For a bag-like venture capitalist, Clark said: [if his shares are] Less than 3.8% of his assets, if that works out, it could be more than that. ”
Craft ventures did not respond to several requests from TechCrunch this week to discuss the story.
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The timing of Vultron's announcement shows complexity. Vultron will create AI tools specifically for federal contractors to help them acquire government contracts more efficiently. The company boasts of reducing its “weeks to days” proposal timeline, claiming that one Fortune 500 client has now saved “more than 20 hours a week” in federal contract work.
According to sources close to the company, craft venture investments predate the government appointment of Sachs. However, timing raises questions. The country's AI emperor has financial interests of companies that benefit from helping companies win highly federal contracts that his policies affect.
Senator Elizabeth Warren is one of the most vocal critics of these arrangements. In a May letter to the Government Ethics Office, ranking members of the Senate Banking Committee questioned the Sachs' crypto exemption and said he would simultaneously “co-host a $1.5 million head dinner for players in the crypto industry” while shaping the federal government's crypto policy.
“Sack is simultaneously leading the companies that invested in crypto while guiding the country's crypto policy,” Warren writes. “Usually, federal law would prohibit such express conflicts of interest.”
Sachs largely dismissed Warren's concerns, accusing him of having “a pathological hatred of the crypto community.” He said individually that before joining the White House he sold his property with Crypto, “I didn't even want to emerge a conflict.”
Certainly, the bag supporters point to the sacrifices he made for government service. According to his exemption, he and craft venture have sold over $200 million in digital assets, with at least $85 million directly attributing him. He sold stakes in the fast-growing companies, including Elon Musk's position in Xai, and began selling profits from around 90 venture capital funds, including Sequoia Funds.
Sources close to Sacks highlight these sales, and note that because of his government's role, craft ventures must carry out all AI and crypto-related transactions past the White House Ethics Committee. They suggest that they are trying not to believe in investing in feeder funds and small transactions, given the amount of work that could come with everyone involved.
Clark argues that the underlying ethical framework remains flawed. The exemption itself is designed to provide legal coverage rather than addressing ethical concerns, she argues. “This is whitewashed,” she said. Compounding the issue even further, the sack works for 130 days a year, virtually every other week, just 130 days (effectively 130 days) while maintaining commercial activity during the off period. For example, in September, popular podcast Sacks and his co-host will be an annual three-day meeting where participants pay $7,500 per person to participate. Although legally permitted, these activities further blur the line between his public and private roles.
Some observers wonder whether Sack is a self-built billionaire by Forbes' estimate – declares victory and withdraws government services altogether. With the Genius Act Now law, he may think that his primary mission has been achieved: bring cryptocurrency from the fringe to center stage.
But that will probably take time. Sacks yesterday used the emergence of Fox News to detail his immediate priorities after the passage of the law, highlighting the development of regulatory frameworks in three key areas, including the definition of market structure categories (securities vs. goods vs. digital assets), expanding regulations for Stablecoin, and the assessment of potential national digital asset stockpiles.
Meanwhile, critics who are concerned about conflicts of interest argue that precedents are set. The rapid passage of crypto-friendly laws, coupled with continued investment in AI companies serving the federal government, suggests that sacks and others with similar arrangements have positioned themselves and the wider trajectory to benefit from access to government.
It remains to be seen whether this represents a new normal in Silicon Valley relations with Washington, or an anomaly that will reverse the future administration. What is clear is that traditional ethical frameworks may be insufficient for the times when venture capitalists can maintain their investment activities while shaping policies that determine the future value of those investments while also maintaining their investment activities.
For now, arrangements protected by carefully crafted exemptions ethics experts question but feel legally unattacked are continuing. As Clark says, “No one can prosecute him.”