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As Sam Bankman-Fried’s life has collapsed into rubble in the wake of his cryptocurrency exchange doing the same last fall, the parents of the former FTX CEO have loomed in the background of the wreckage.
Rocketing from a job as a Wall Street quant to running his own crypto hedge fund to founding what would become the emblem of the crypto economy’s high highs and low lows, the young entrepreneur relied on his prominent and accomplished parents for expertise and optics. His dad, Joseph Bankman, worked on a range of FTX matters, and his mom, Barbara Fried, once called herself her son’s “partner in crime of the noncriminal sort.” Both of SBF’s parents are Stanford Law professors, and both seemed to have their son’s ear. Having them around was useful as Bankman-Fried pitched FTX as a more mature and mainstream corner of the crypto economy and himself as the company’s face. He had, according to a lawsuit that FTX’s bankruptcy executive team filed against his parents on Monday, sometimes referred to his now-crumbled crypto empire as a “family business.”
SBF’s parents were also useful once FTX collapsed and the CEO found himself accused of international criminality. They were essential to SBF getting released on bond after the feds charged him with various flavors of fraud in December 2022: Not only did SBF have to stay with them in Palo Alto, an environment that had the sheen of a place where responsible adults would be looking after him, but Bankman and Fried secured the $250 million bond with their house, where they agreed SBF would stay confined.
Apparently the parental supervision wasn’t up to snuff. SBF’s trial in a New York federal courthouse begins in October, but he’s been in jail since August. The judge in the case sent him there because SBF had been an exceptionally grating defendant for the prosecution and the bench. Prosecutors complained that Bankman-Fried had shared a witness’s diary entries with a New York Times reporter, that he’d tried to cozy up to other potential witnesses against him, and that he’d used a virtual private network, which can mask one’s internet activity, although SBF said it was so he could watch NFL games. When the judge sent him off to the clink, Puck’s Teddy Schleifer reported, his mother cried in the courtroom. All of this might look a certain way, and to a large extent it surely is: the devastated parents of a deposed crypto boy king struggling to cope with how things got this bleak.
FTX’s new suit against Bankman and Fried casts the parents in a very different light—albeit in the hopes of clawing back a fortune from them in order to pay FTX creditors, such as customers who stored crypto on the exchange and never got it out before the whole thing went bust. The suit says that SBF’s parents “exploited their access and influence within the FTX enterprise to enrich themselves” by millions of dollars and knowingly bilked FTX and its customers as they did so. A lawyer for the couple says the suit is “a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins.” Whether the suit leads to the recovery of funds is unknowable, but it does its job of painting SBF’s parents as naifs at best and disingenuous grifters riding their son’s coattails at worst.
Bankman, according to FTX, was right in the thick of a whole bunch of FTX business—what sounds like just about everything that did not involve the actual trading of crypto and minting of coins. The suit says that SBF’s father directed where company payments would go, picked out charities to benefit from his son’s largesse, entered into and terminated contracts, hand-picked the company’s outside counsel, made hiring recommendations, and authorized expenses. The suit also says that some of FTX’s expenses wound up being for really nice things for him and Fried.
That Bankman was heavily involved in FTX’s operations seems difficult for anyone to dispute, given a clearly intentional effort on the company’s part (under its old management) to raise awareness of his involvement. One of the suit’s more descriptive examples of how the sausage gets made describes SBF’s prep for a meeting with the editor in chief of Vogue (which ostensibly means Anna Wintour, though she isn’t named). The company’s “head of global luxury partnerships” advises SBF to “mention the role your Dad and brother play behind the scenes supporting you at FTX and in Washington alike.” Bankman had a lot to do with FTX, and FTX wanted everyone to know about it.
A great deal of the complaint revolves around the idea that Bankman, who has decades of tax law experience, either knew FTX was a fraudulent mess or should’ve known about it and missed such obvious red flags that he bears legal responsibility for them. The complaint lacks a smoking gun to that effect. (If it had one, maybe prosecutors instead of FTX bankruptcy execs would be filing it!) But it has quite a lot to paint both of Bankman-Fried’s parents in a deeply unflattering (if not necessarily crime-committing) light, and maybe FTX hopes that it will be useful as a way to separate SBF’s parents from some money.
Specifically: FTX’s new management says that Fried, SBF’s mother, used ill-gotten funds from her son’s businesses as a piggy bank for her political action committee. The PAC, an operation called Mind the Gap that tries to get Democrats elected to office, received “tens of millions” of dollars from Bankman-Fried and FTX executive Nishad Singh, the complaint says. Singh’s contributions, it notes, came directly out of FTX’s coffers. It details a money-in, money-out cadence in which Bankman-Fried’s hedge fund sent money to Singh and then, within a day, Singh sent similar (or even identical) amounts directly to Bankman-Fried’s mom’s PAC. Singh has admitted to campaign finance violations. Maybe Fried, SBF’s mother, was entirely unaware of and disconnected from this operation. But an August 2022 email cited in the lawsuit includes Fried explicitly explaining to her son that he could use another FTX executive to make PAC contributions in his name, “but that has its own costs and risks.” Not a great thing to have in writing!
Other parts of the lawsuit sit somewhere between outrageous and very funny. The suit says that Bankman, SBF’s father, was at one point drawing a $200,000 annual salary from FTX but that he thought he was “supposed to” be getting a nice, round $1 million. He emailed his son, according to the suit, “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,” he added, calling in the boss’s mother. The suit says that shortly thereafter, Bankman-Fried made a $10 million gift to his parents out of funds from Alameda Research (FTX’s sister hedge fund), then had the couple put on the deed to a $16.4 million Bahamas property with funds “ultimately provided” by FTX.
The suit also says that Bankman requested (and got) to appear in that now-infamous Larry David Super Bowl commercial. The suit mentions a Bankman email in which he says he is “not a star-fucker” and doesn’t care about meeting, “say, Tom Brady. But Larry David …” Bankman also used FTX funds, the suit says, to send a former Stanford Law student, who then became FTX outside counsel, on “a free trip to France” (Bankman’s words) to watch a Formula One Grand Prix. Bankman-Fried misled the world about a lot of things, but he appears to have been honest about at least one: that FTX was, at heart, a family affair.