The Stanford law professor parents of FTX founder Sam Bankman-Fried face the prospect of mounting legal bills following his arrest in the Bahamas on US federal charges.
Joseph Bankman and Barbara Fried have remained by their 30-year-old son’s side in the Bahamas since his crypto exchange collapsed in bankruptcy last month, but his arrest on Monday adds a new element of stress for the tight-knit family.
Bankman and Fried have told friends that their son’s legal bills will likely wipe them out financially, the Wall Street Journal reported.
‘We hope this gives us some wisdom,’ Bankman said of the FTX saga, the Journal reported, citing people close to him. ‘Otherwise, it would be too hard to take.’
Bankman-Fried was born on the campus of Stanford University in California to the two esteemed law professors, and often mentioned their credentials as a way to bolster his own credibility.
Parents Joseph Bankman (left) and Barbara Fried (right) have remained by their 30-year-old son’s side in the Bahamas since his crypto exchange collapsed in bankruptcy last month
Bankman and Fried, both Stanford law professors, have told friends that their son’s legal bills will likely wipe them out financially
Though Bankman and Fried’s moral support for their son has been clear, after they were spotted at his penthouse soon after FTX’s November 11 bankruptcy, Bankman’s direct role in the company may have been larger than previously reported.
Bankman was a paid employee of FTX for 11 months, primarily focused on its charity efforts, a family spokeswoman told the Journal, adding that Fried was not involved with the company.
On a podcast in August, Bankman said he had become increasingly involved with FTX’s philanthropy, including efforts to help unbanked Americans get bank accounts and crypto wallets.
He said that he had been pitching in at his son’s request, noting: ‘I think any parent would love to hear that.’
‘I mean the company didn’t have any lawyers,’ Bankman said in the podcast, noting he had helped recruit outside counsel for his son’s trading firm Alameda Research. ‘So I think my utility there was pretty obvious.’
Bankman is Ralph M. Parsons Professor of Law and Business at Stanford Law School.
Last week, the San Francisco Standard reported he had cancelled his course on tax policy next semester in anticipation of helping his son through his legal troubles.
Fried and Bankman are seen on the balcony of their son’s Bahamas penthouse after rushing to be by his side when his company filed for bankruptcy last month
Though friends say the parents have offered their son some informal legal advice, they primarily specialize in tax policy and corporate law, and likely lack the criminal defense experience Bankman-Fried will need as he faces federal charges.
‘I feel really grateful for the support my parents are still giving me throughout all of this,’ Bankman-Fried said recently at the New York Times DealBook Summit.
Bankman’s former students told The San Francisco Standard that the professor was a ‘softie’ and cared deeply about students. He also became a licensed psychologist midway through his career.
‘I’ll be spending substantially all of my resources on Sam’s defense,’ he wrote to the director of a nonprofit that could no longer be funded through the FTX Foundation.
Bankman-Fried’s mother, Barbara Fried, is the William W. and Gertrude H. Saunders Professor of Law, and co-founder of Mind the Gap, a ‘secretive Silicon Valley’ Political Action Committee that has raised millions of dollars for Democratic candidates.
Mind the Gap operates in a cone of secrecy, often exhorting its donors to keep their information secure. It has no website or presence on social media, and its leaders don’t mention their involvement in their professional biographies on sites like LinkedIn, according to Vox.
Property documents reported by Reuters show that Bankman and Fried own a $16million home with beach access in Old Fort Bay, an exclusive enclave in Nassau.
$16 million: The entrance to Old Fort Bay, the exclusive gated community where records show Bankman-Fried’s parents owned a ‘vacation home’
The property, one of the documents dated June 15 said, is for use as a ‘vacation home.’
Old Fort Bay is an exclusive gated community that was once the site of a British colonial fort built in the 1700s to protect against pirates who roamed the Caribbean.
The original fort has been restored into a private clubhouse for the resort community, and an antique cannon still sits on the lawn.
The couple have said through a spokeswoman that they had been trying to return ownership of the home to FTX since before the bankruptcy filing.
‘Joe and Barbara never intended to and never believed they had any beneficial or economic ownership in the house,’ their spokeswoman told the Journal. ‘Over the summer, they requested FTX counsel and outside counsel take steps to clarify the company’s beneficial ownership of the house.’
Police in the Bahamas, where FTX was based, said Bankman-Fried was arrested on Monday evening at his luxury gated community called the Albany in the capital, Nassau, at the request of US federal prosecutors.
US federal prosecutors on Tuesday alleged Bankman-Fried committed fraud and violated campaign finance laws, and the founder and former CEO of FTX also faced additional charges by US regulators.
Police vehicles, one of which is occupied by Sam Bankman-Fried, arrive at the Magistrate Court building in Nassau, Bahamas on Tuesday
The 30-year-old Bankman-Fried arrived at a heavily guarded Bahamas court on Tuesday for his first in-person public appearance since the crypto currency exchange’s collapse. He could be extradited to the United States.
‘Mr Bankman-Fried is reviewing the charges with his legal team and considering all of his legal options,’ his lawyer, Mark S. Cohen, said in a statement.
In the indictment, prosecutors said Bankman-Fried had engaged in a scheme to defraud FTX’s customers by misappropriating their deposits to pay for expenses and debts and to make investments on behalf of his crypto hedge fund, Alameda Research LLC.
He also defrauded lenders to Alameda by providing them with false and misleading information about the hedge fund’s condition, and sought to disguise the money he had earned from committing wire fraud, prosecutors said.
Both the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) alleged Bankman-Fried committed fraud in lawsuits filed on Tuesday.
‘While he spent lavishly on office space and condominiums in The Bahamas, and sank billions of dollars of customer funds into speculative venture investments, Bankman-Fried’s house of cards began to crumble,’ the SEC filing said.