Sam Bankman-Fried: A Stanford Law Professor’s Story of a Misleading FTX founder and a Family Guy in New York
The parents of disgraced FTX founder Sam Bankman-Fried are in legal trouble of their own, as he prepares for his trial on Tuesday.
For almost a year, Bankman-Fried’s mom and dad, both of whom are professors at Cardinal Law School, have traveled to New York to watch their son’s trial.
The company is alleged to have bought the house in The Bahamas for $16.4 million. After Bankman expressed dissatisfaction with his $200,000 FTX salary, his son wired a $10 million cash gift to his parents, which FTX lawyers say came from Alameda Research, a crypto hedge fund Bankman-Fried founded.
Sam Bankman- Fried’s parents are accused of helping run their son’s empire and of being rewarded handsomely for their work.
Gurbir Grewal, the head of the Securities and Exchange Commission’s division of enforcement, has said FTX “operated behind a veneer of legitimacy that Bankman-Fried created.” But, “that veneer wasn’t just thin. It was fraudulent.”
Bankman and Fried are important figures in the community and beloved members of it. They have won numerous awards for their scholarship and teaching, and many of their colleagues consider them close friends.
In an email, Robert Gordon, who has known the couple since the 1980s, said, “Anyone who knows Barbara Fried and Joe Bankman well will believe it absurd to think that they were engaged in self-dealing — since for many years they have given generously of their time and money to good causes.”
According to his official biography, Bankman is a leading scholar in the United States Tax Policy, and he teaches mental health law and writes on the intersection of law and psychology.
“I never intended to quit my day job,” he told the Stanford Lawyer, a magazine for Stanford Law School alumni, in 2015. “But my scholarship and policy were venturing into behavioral psychology and the law, and I wanted to understand more about human behavior.”
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Bankman was a guest on NPR’s Planet Money in which he came across as very passionate about tax reform. Bankman had a joke about his clothes. He pointed out that his cuffs were torn and that his pants were stained.
Fried received the John Bingham Hurlbut Award for excellence in teaching and told the graduates at the Law school that he loves explaining things. “I love taking something opaque and make it seem a little less opaque.”
She was an undergrad and graduate student at Harvard University in the late 1970s and early 1980s, where they had influential philosophers like John Rawls and Robert Nozick on the faculty.
She has also written about how society treats criminals. In an article titled “Beyond Blame,” which was published in 2013, she argued everybody is ultimately compromised.
“The reality is that we are all at best compromised agents, whether by biology, social circumstance, or brute luck,” Fried wrote in the Boston Review. “Tellingly, the more information people have about the context of the crime, the person who committed it, and the circumstances he or she came from, the more nuanced are their views of moral responsibility.”
“One unanticipated joy of writing fiction has been the opportunity it has offered me to escape from myself, and reimagine the world through the lives and eyes of others,” she notes on her personal website.
Politics became another passion project, and in recent years, she co-founded a nonprofit organization called Mind the Gap, which was described in a Vox article as “a secretive group led by Stanford University academics” that “has unleashed millions of dollars in political spending from Silicon Valley.”
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FTX was worth $32 billion before Bankman-Fried started the company. The company ran one of the largest cryptocurrency exchanges in the world, and it was the centerpiece of a crypto empire that spanned the globe.
One of the biggest political donors in the US was Bankman- Fried, who gave around 40 million dollars to political candidates, committees, campaigns, and causes.
Federal prosecutors have charged Bankman-Fried with violating campaign finance laws by using straw donors.
Joseph Bankman and Barbara Fried live in what has been widely described as a modest house on the Stanford University campus, but their lives changed as FTX grew, along with their son’s wealth, according to FTX’s lawyers.
“We are so touched by this gift,” Bankman wrote his son, in an e-mail message quoted in the lawsuit. Mom is retiring, which she wouldn’t have done otherwise.
FTX allegedly paid for the decoration and upkeep of the home in The Bahamas and according to the lawsuit, Bankman allegedly flew on privately-chartered jets, “expensed $1,200 per night hotel stays to the FTX Group, and even appeared in a Super Bowl commercial with Seinfeld writer Larry David months before the FTX Group imploded.”
Bankman and Fried have kept a low public profile since their son’s arrest. Fried is an emerita at the law school and has taken a break from teaching. Bankman is on leave. A Stanford spokesperson said they both remain on the faculty.
Michael Klausner, who was Bankman’s classmate at Yale Law School, and is now a colleague at Stanford, said he regularly sees Bankman on campus. They keep having friends over for dinner despite what happened over the last year.
He said that the case against Bankman-Fried has been a subject of discussion among him and his colleagues. The way the case has been handled from the beginning is something that I think many of us do not agree with.
Fried told The New Yorker that saving Sam is the main project of her and her husband’s lives.
Judge Lewis Kaplan has the power to give a different sentence if he finds Bankman-Fried guilty. He could decide to let Bankman-Fried serve a concurrent sentence.
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The trial marks a bad fall from grace for the billionaire who met many famous people, including Gisele Bndchen and Bill Clinton.
After Bankman-Fried’s rivals raised questions about the company’s practices, everything fell apart. Billions of dollars have gone missing, and Damian Williams, the U.S. attorney for the Southern District of New York, alleges Bankman-Fried is responsible for “one of the biggest financial frauds in American history.”
Two financial regulators, the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, have brought parallel suits against Bankman-Fried, alleging similar misconduct.
Kaplan sent the former FTX CEO there after Bankman-Fried violated the terms of his bail. He used a virtual private network without the court’s consent and showed a reporter the private writings of his ex- girlfriend and the former head of Alameda.
Author Michael Lewis shadowed Bankman-Fried for more than a year, for a book called “Going Infinite: The Rise and Fall of a New Tycoon” that hits store shelves on Tuesday.
According to an interview with “60 Minutes,” Lewis thinks that the ex-hacker may go crazy if he loses access to the internet for some time.
“If you gave Sam Bankman-Fried a choice of living in a $39 million penthouse in The Bahamas without the internet, or the Metropolitan Detention Center in Brooklyn with the internet, there’s no question in my mind he’d take the jail,” Lewis said.
According to Tarek Helou, a lawyer in private practice who spent more than a decade at the Department of Justice, there is a mantra among federal prosecutors: “Thin to win.”
Bankman-Fried is an entrepreneur in the new world of cryptocurrencies, and she has no intention of giving a bad word to the public
This case is novel because it involves a company that did business in the new world of crypto. Prosecutors want to make clear that this is a financial fraud case, plain and simple.
Helou says the Justice Department doesn’t plan to say it’s about cryptocurrencies. They’re going to simplify the case and say it’s a case about lying and stealing.
“I didn’t ever try to commit fraud on anyone,” Bankman-Fried told The New York Times days before he was arrested. “Clearly, I made a lot of mistakes that are things I would give anything to be able to do over again.”
FTX was headquartered in The Bahamas, where employees and executives, many of whom were in their 20s, lived together in a $30 million penthouse as they ran a sprawling business.
She pleaded guilty to several fraud counts shortly after Bankman-Fried was arrested last December, and three other executives have also pleaded guilty: Nishad Singh, Gary Wang, and Ryan Salame.
In a recent court filing, prosecutors said they would put FTX customers on the stand.
He used X, formerly known as Twitter, and started a newsletter on Substack. Bankman-Fried invited journalists to visit him at his parents’ house where he had been placed initially after posting bail, and prosecutors say Bankman-Fried had around 1,000 phone calls with reporters.
It is unorthodox for a defendant facing such serious charges to talk so openly about his case, and it was a source of growing frustration to prosecutors and the judge, who decided to revoke Bankman-Fried’s bail in August.
During his tenure, Kaplan has presided over a number of high-profile trials, including, most recently, columnist E. Jean Carroll’s civil suit against former President Trump.