There’s nothing worse for a mother and father than to see their children suffer – or is there?
For Sam Bankman-Fried’s parents to spend day after day seated on a wooden bench in a Manhattan courtroom, watching federal prosecutors show a jury (and the world) how their son was the mastermind of one of the biggest financial frauds in history, must have been incredibly hard.
But that may be just the beginning of the tribulations that expect Joseph Bankman and Barbara Fried.
As Sam Bankman-Fried awaits sentencing, that could potentially send him to prison for the rest of his life, the formerly eminent Stanford Law professors also have their own potential criminal exposure to worry about, caused by their roles in their son’s collapsed crypto empire.
Both Fried and Bankman attended all court sessions of their son’s trial. They many times behaved in a way contrasting with Bankman-Fried’s numb demeanor.
Bankman would show his son a thumbs and mother Fried, on multiple occasions, broke into tears, her husband’s arm wrapped around her.
Washington Post reported:
“The couple already face a challenge in civil court from the creditors of FTX, the bankrupt crypto exchange that Bankman-Fried co-founded. He gave his parents a $10 million cash gift and bought them a $16.4 million property in the Bahamas that FTX investors and customers have sued to recover, according to the lawsuit.
Beyond the financial windfall, both parents’ level of involvement with their son’s work will likely bear on their legal vulnerability. Bankman, a tax expert and clinical psychologist, served as an adviser to his son on business matters as far back as 2018 and remained a key member of his inner circle through the exchange’s implosion a year ago, according to the civil suit and evidence from the criminal trial. Fried, an ethics scholar and co-founder of a Democratic fundraising organization, advised her son on concealing campaign donations in a scheme that elicited guilty pleas from two of his top deputies, according to the civil suit.”
So far, neither has been charged with any criminal wrongdoing.
“But the fate of Bankman-Fried’s parents remains a loose thread in the FTX saga. He received ‘counsel from his parents this entire time, so they’re very, very close to the heart of this story, unfortunately’, said Mark Bini, a former federal prosecutor specializing in financial crime. ‘The closer a person is to the main defendant, the more likely that a judge or jury would find there was a meeting of the minds on intent. Their proximity could lead to significant civil exposure and possibly even criminal exposure’, Bini added.”
In addition to the conviction of SBF, government attorneys have secured guilty pleas from four of his top executives.
Bankman-Fried consistently said that his parents ‘weren’t involved in any of the relevant parts’ of its operations.
But a civil suit filed in September by John J. Ray, the corporate specialist managing FTX through its bankruptcy, claims otherwise.
“The suit notes Bankman repeatedly referred both to FTX and Alameda Research, Bankman-Fried’s crypto-focused hedge fund, as a ‘family business’, and it argues the parents ‘exploited their access and influence within the FTX enterprise to enrich themselves’. The couple ‘either knew — or ignored bright red flags revealing — that their son, Bankman-Fried, and other FTX Insiders were orchestrating a vast fraudulent scheme’, the suit alleged.”
Bankman was as an outside adviser to his son until joining the payroll of FTX’s U.S. arm in December 2021.
Bankman counseled FTX engineering director Nishad Singh on a $477 million loan he took from the company.
Fried taught her son to obscure the source of campaign funds as part of a $100 million political-influence-buying operation.
“In an email Fried sent Bankman-Fried in August 2022, she pointed to a contributor who would ‘only give in a non-disclosed form, and I would strongly urge you to do the same — or substitute someone else’s name’, according to the civil suit. She emailed her son again a week later to ‘counsel strongly against giving in a disclosed form under your own name’.”
Fortune reported:
“Bankman-Fried’s bankrupt FTX exchange, now led by a caretaker CEO, is suing Bankman and Fried to recover a $10 million gift from their son that was paid with corporate funds. More seriously, the parents—Bankman in particular—might face the risk that federal prosecutors charge them for abetting their son’s criminal enterprise.”
Specialists are divided on whether Bankman might ultimately be charged. But there’s a consensus that his advising his son and FTX puts him in very real jeopardy.
“The benefits to the parents were enormous. As FTX rode the 2021 crypto boom to a $32 billion valuation, Bankman took a leave from Stanford to devote more time to the exchange. But as the new FTX lawsuit recounts, Bankman soon complained to his son, in an email that copied his wife, that the initial $200,000 salary allotted to him was insufficient, and asked instead for $1 million.
‘Gee, Sam I don’t know what to say here. This is the first [I] have heard of the 200K a year salary! Putting Barbara on this’, Bankman wrote to his son, according to the lawsuit. Soon after his wife would weigh in by writing, ‘That would be right if you were giving dad $10 million in cash, but I thought you were giving him only $7.2 million in cash plus the $2.8 mill in the account in his name’.
{…] Then there is the $18.9 million that Bankman-Fried spent on a 30,000-foot Bahamian luxury villa known as Blue Water. While the property was nominally a corporate residence, the lawsuit alleges that Bankman-Fried deeded it to his parents, who enjoyed the exclusive use of it and referred to it as ‘our house’.”
Not a great look for the couple – Bankman is an authority on corporate law, while Fried is a leading scholar of ethics.
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