Sam Bankman-Fried’s parents benefited financially from his “net of deception” in which he defrauded FTX customers out of a total of $8 billion.
He committed one of the largest financial frauds in American history – using FTX customer deposits to fund risky investments in the fledgling hedge fund Alameda, which he ran with his ex-girlfriend Caroline Ellison.
The 31-year-old billionaire was convicted of two counts of fraud and five counts of conspiracy. He now faces a prison sentence of up to 110 years.
His parents, longtime Stanford Law School professors Joe Bankman and Barbara Fried, stood by him despite the allegations and were a constant presence during the high-profile trial, which began Oct. 4.
It turned out that Bankman-Fried gave them cash, a house in the Bahamas and a job with a salary of $200,000 at his company. They helped post his $250 million bail, paid his security and legal fees and allowed him to live in their home near campus during house arrest.
Bankman-Fried’s parents arrived at Manhattan federal court Wednesday to support their son
Bankman-Fried’s FTX was worth $32 billion before its collapse in November last year and he was hailed as the future of finance, the Steve Jobs of crypto.
But as prosecutors argued in court, he “lied to the world” because in reality he was simply stealing FTX customers’ money.
The “house of cards” collapsed last year as crypto prices fell and media reports raised questions about how much of the $32 billion valuation was based on FTT, FTX’s crypto token.
When customers tried to withdraw their money, the crypto equivalent of a bank run occurred and FTX was shut down.
Bankman-Fried gave his parents Joe and Barbara $10 million as well as a luxury condo in the Bahamas worth $16.4 million.
His father even quit his job at Stanford and joined FTX for a salary of $200,000.
But Joe reportedly complained that this was only a fraction of the $1 million he had expected, according to court documents.
The Stanford University law professor complained that he was making about $16,500 a month when he expected to make $80,000.
He directed his anger at his son before chiming in on his mother and telling him, “Gosh, Sam, I don’t know what to say here.”
‘This is the first [I] I heard about the 200,000 annual salary! I’ll put Barbara on this.’
Although Barbara “never had a formal position at FTX Group.”
Weeks later, the couple received $10 million from Alameda Research, FTX’s sister hedge fund also founded by their son, the lawsuit says.
Within three months, they were handed the deed to a $16.4 million home in the Bahamas.
Joe and Barbara were sued by the bankruptcy lawyers who oversaw the company’s liquidation to recover monies paid to them.
FTX founder Sam Bankman-Fried sworn in his fraud trial on October 27th
Bankman-Fried hangs his head in this courtroom sketch after being handcuffed and taken into custody in August
Prosecutor Nicolas Roos used his closing arguments to tell jurors that the 31-year-old billionaire “believed he was smarter and better” and that he would get away scot-free if he took people’s money
Lawyers claim that Joe used his Stanford University law professor, Barbara, to “lobby” her son to increase his salary.
Barbara is also accused of helping her son “avoid or even violate federal campaign finance disclosure requirements” in connection with his political donations.
The pair were also accused of helping to cover up complaints from the crypto exchange’s former lawyer.
Meanwhile, Joe allegedly siphoned off $5.5 million in donations to Stanford University to curry favor with his employer, while also “showering” his family and friends with gifts.
The prestigious university announced in September that it would refund the funds of all donations collected by FTX and affiliates.
A series of fraud and money laundering charges were leveled against Bankman-Fried in December, and his parents were said to have been working ahead of the trial to find a way to pay his security and legal fees.
They also reportedly bought him a German Shepherd puppy to cheer him up.
The money for his expensive legal defense came from the “multimillion-dollar gift” he gave his parents, it is said Forbes.
Thanks to the help of his parents, who secured most of the bail against their property in Palo Alto, California, he was released on $250 million bail in December.
Stanford scholars Larry Kramer, a former dean of Stanford Law School, and Andreas Paepcke, a Stanford computer scientist, have each signed on as guarantors worth $500,000 and $200,000, respectively.
Bankman-Fried was under house arrest at his parents’ property near the Stanford University campus.
Prosecutor Roos accused Bankman-Fried of “celebrity hunting” and showed the jury the famous picture of him at the 2022 Super Bowl with singer Katy Perry (left) and Orlando Bloom (second from left).
But U.S. District Judge Lewis Kaplant revoked his bail in August after finding that the former billionaire likely tampered with witnesses at least twice.
His parents continued to show up at almost every court hearing to show their support.
Joe and Barbara are in the middle of a civil case against FTX’s current management, which accuses them of using company funds to enrich themselves and is trying to recover the money paid to them.
However, no criminal proceedings will be initiated against the couple.
More than $7 billion of the money stolen from FTX has now been recovered, but those who lost won’t get it all back due to the cryptocurrency’s changes in value between now and last November.