David Sacks and the Blurred Lines of Government Service

The recent announcement of Vultron, an AI startup focused on federal contractors, securing a $22 million funding round has brought renewed scrutiny to the intricate relationship between government service and private financial interests. A key investor in Vultron is Craft Ventures, co-founded by David Sacks, who concurrently serves as a White House AI and crypto adviser. This arrangement has ignited a debate among ethics experts, who contend that the boundaries between public duty and personal gain have become increasingly ambiguous under this new model of government service.

David Sacks operates under not one, but two ethics waivers, permitting him to influence federal policy while maintaining significant financial stakes in the very industries he helps oversee. The initial waiver, an 11-page document issued in March, addresses his crypto investments. A subsequent waiver, granted in June, specifically pertains to his AI holdings. These waivers collectively facilitate an unprecedented scenario, according to ethics watchdogs.

“This is graft,” stated Kathleen Clark, a Washington University law professor specializing in government ethics, after reviewing Sacks’ crypto waiver. Clark elaborated that a White House Counsel’s office lawyer is “doing Trump’s bidding, letting [Sacks] make money while insulating him from criminal liability.” Her critique extends to the transparency of the waivers, noting they specify percentages of Sacks’ total assets—for instance, his stake in Craft’s portfolio was less than 3.8% of his total assets when the waiver was signed—but omit the actual dollar amounts. Clark highlighted the disparity, “The fact that this interest is just 3.8% of someone’s total assets, that’s something if you’re talking about a law professor. But 3.8% of this guy’s assets is a heck of a lot of money.”

Furthermore, Clark argues that the waivers fail to adequately consider potential future gains. Federal regulations mandate an evaluation of “potential profit or loss,” not merely current value. For a venture capitalist like Sacks, “even if right now [if his shares are] less than 3.8% of his assets, if it does well, it could be more than that,” Clark asserted. Craft Ventures has not commented on these matters.

The timing of the Vultron investment further underscores these complexities. Vultron aims to streamline federal procurement with AI tools, claiming to significantly reduce proposal timelines and save clients substantial work hours on federal contracting. While a source close to the company indicates Craft Ventures’ investment predates Sacks’ government appointment, the situation raises pertinent questions: the nation’s chief AI adviser holds a financial interest in a company poised to profit from securing federal contracts, which his own policy decisions may influence.

Senator Elizabeth Warren has emerged as a prominent critic of these arrangements. In a May letter to the Office of Government Ethics, the ranking member of the Senate Banking Committee challenged Sacks’ crypto waiver, pointing out that he was simultaneously “co-hosting a $1.5 million-a-head dinner for crypto industry players” while actively shaping federal crypto policy. “Mr. Sacks simultaneously leads a firm invested in crypto while guiding the nation’s crypto policy,” Warren wrote, adding that “Normally, federal law would prohibit such an explicit conflict of interest.”

In response, Sacks has largely dismissed Warren’s concerns, accusing her of having a “pathological hatred for the crypto community.” He has also stated that he divested a significant portion of his crypto assets prior to joining the White House to avoid even the “appearance” of a conflict. Supporters of Sacks emphasize the considerable financial sacrifices he has made for his public service. According to his waivers, he and Craft Ventures have divested over $200 million in digital assets, with at least $85 million directly attributable to him. This includes selling stakes in rapidly growing companies like Elon Musk’s xAI and initiating the sale of interests in approximately 90 venture capital funds, including Sequoia funds.

A source close to Sacks highlighted these divestments, noting that his government role necessitates that Craft Ventures seek approval from the White House ethics committee for every AI and crypto-related deal. This oversight, they suggest, makes investing in feeder funds and smaller deals impractical due to the extensive work involved for all parties.

Despite these measures, Clark maintains that the fundamental ethical framework remains flawed, asserting that the waivers primarily serve as legal protection rather than addressing genuine ethical concerns. “This is whitewashing,” she concluded. Adding to the complexity, Sacks operates as a government employee for only 130 days annually—effectively every other week—while continuing his commercial endeavors during his off-duty periods. For instance, in September, Sacks and his “All In” podcast co-hosts are slated to host an annual three-day conference, with attendees paying $7,500 each. While legally permissible, such activities further blur the distinction between his public and private roles.

With the recent passage of the GENIUS Act, some speculate whether Sacks, a self-made billionaire, might consider his primary mission accomplished and depart government service. However, Sacks recently outlined his immediate priorities on Fox News, emphasizing the need for regulatory frameworks in defining market structure categories (securities vs. commodities vs. digital assets), expanding stablecoin regulations, and evaluating a potential national digital asset stockpile.

Meanwhile, critics remain concerned that a precedent has been established. The swift enactment of crypto-friendly legislation, coupled with ongoing investments in AI companies serving the federal government, suggests that individuals like Sacks, and their wider networks, are positioned to benefit from their government access. The enduring question is whether this represents a new norm for Silicon Valley’s engagement with Washington or merely an anomaly that future administrations will rectify. What is evident is that conventional ethics frameworks may no longer suffice in an era where venture capitalists can sustain their investment activities while simultaneously shaping policies that directly influence the future value of those investments.

For now, this unique arrangement persists, safeguarded by meticulously crafted waivers that, while scrutinized by ethics experts, are deemed legally unassailable. As Clark succinctly put it: “No one will be able to prosecute him.”