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Sam Bankman-Fried’s parents spent many of their waking hours in October sitting on a wooden bench in a Manhattan courtroom, a few feet behind the former cryptocurrency mogul, watching as federal prosecutors convinced a jury that their son was one of the biggest financial fraud cases had staged history.
Now Bankman-Fried awaits sentencing, which could send him to prison for the rest of his time Legal experts say Joseph Bankman and Barbara Fried — formerly respected Stanford law professors — should be concerned about their own potential criminal exposure due to their roles in their son’s collapsed crypto empire.
The couple is already facing a civil court lawsuit from creditors of FTX, the bankrupt crypto exchange that Bankman-Fried co-founded. He gave his parents $10 million in cash and bought them a $16.4 million property in the Bahamas, which FTX investors and customers have sued to reclaim, the lawsuit says.
In addition to the financial windfall, the involvement of both parents in their son’s work is likely to have an impact on his legal vulnerability. Bankman, a tax expert and clinical psychologist, served as his son’s advisor on business matters as early as 2018 and remained an important member of his inner circle even after the exchange’s implosion a year ago, according to the exchange’s civil lawsuit and evidence in 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 led two of his top deputies to plead guilty, according to the civil lawsuit.
Lawyers for Bankman and Fried said in a statement that the allegations in the civil lawsuit were “completely false.” None of them have been accused of criminal wrongdoing. A spokesman for the U.S. attorney’s office in Manhattan declined to comment.
But the fate of Bankman-Fried’s parents remains a loose thread in the FTX saga. He “received advice from his parents the whole time, so unfortunately they are very, very close to the heart of this story,” said Mark Bini, a former federal prosecutor who specialized in financial crimes. “The closer a person is to the primary defendant, the more likely it is that a judge or jury would find that there was an intentional disagreement.”
“Their proximity could result in significant civilian and possibly even criminal danger,” Bini added.
Prosecutors have wide latitude in deciding who to charge. In addition to successfully prosecuting Bankman-Fried, prosecutors also secured guilty pleas from four of his top executives. And Bankman-Fried himself is scheduled to stand trial again in March on charges of committing bank fraud and bribing Chinese officials. As prosecutors continue to review the matter, they could uncover evidence that would force them to file charges against the parents, legal experts say.
Criminal liability is “not an on-off switch, but a spectrum,” said Renato Mariotti, another former federal prosecutor specializing in financial crimes.
“Anyone who is involved … or closely involved with a person who is committing a crime and is on the radar of federal prosecutors is in a danger zone,” he said. “And Sam’s parents should certainly be concerned about the possibility of charges.”
After FTX collapsed last year, Bankman-Fried said his parents were “not involved in any of the relevant parts” of the business.
The civil lawsuit filed in September by John J. Ray, the corporate resolution specialist managing FTX during bankruptcy, claims otherwise.
The lawsuit notes that Bankman has repeatedly referred to both FTX and Alameda Research, Bankman-Fried’s cryptocurrency-focused hedge fund, as “family businesses” and argues that the parents “exploited their access and influence within the FTX company have to enrich themselves”.
The couple “either knew that their son Bankman-Fried and other FTX insiders were orchestrating a huge fraudulent scheme or ignored glowing warning signs that suggested so,” the lawsuit said.
Officially, Bankman served as his son’s outside advisor until he joined the payroll of FTX’s US division in December 2021, 11 months before the collapse, as senior advisor to the company’s charitable foundation. But in practice he took on a much broader portfolio, as witness statements and evidence in the criminal trial suggest.
Bankman advised FTX’s chief technical officer, Nishad Singh, on a $477 million loan he took from the firm, Singh testified. Bankman also participated in 16 Signal group chats with his son and other top executives about company business and was on-site at FTX A Bahamian lawyer hired by FTX testified that he was accompanying his son to a meeting with the country’s securities regulator when the Bahamian headquarters collapsed.
The civil lawsuit also points to Bankman’s insider role. Back in September 2019, Bankman “failed to investigate a whistleblower complaint” about “exposing FTX Group as a house of cards,” the lawsuit says. His status earned him perks like private jet flights, $1,200 hotel stays, and a cameo in an FTX Super Bowl commercial opposite Larry David.
Fried, meanwhile, appeared to coach her son how to conceal the source of campaign funds as part of a $100 million political influence-buying scheme, the civil lawsuit says. Singh and Ryan Salame, former co-CEO of FTX’s Bahamian subsidiary, have already pleaded guilty to violating campaign finance law for their involvement in the scheme by making donations that Bankman-Fried reimbursed.
In an email Fried sent to Bankman-Fried in August 2022, she pointed to a contributor who “would only donate in an undisclosed form, and I would urge you to do the same – or the name of one.” to replace another person,” according to the civil lawsuit. A week later, she emailed her son again to “strongly advise against disclosing anything under your own name.”
Bankman-Fried responded that he “agrees that it makes no sense for me to disclose anything.”
Both Fried and Bankman were integral parts of their son’s trial and were often expressive in ways that contrasted with Bankman-Fried’s stoicism. Even during the most tense moments of the trial, Bankman regularly gave his son the thumbs up; Fried burst into tears several times during testimony while her husband’s arm wrapped around her.
Prosecutors considering charges against Bankman and Fried would have to weigh several factors, former prosecutors say. They would consider their view of the parents’ guilt, the strength of the evidence against them, and the extent to which the broader cause of justice would be served by devoting limited resources to their prosecution.
“There’s a complicated kind of decision matrix for prosecuting parents for involvement in their son’s crime, when really the question is, ‘How much did the parents know?'” said Joshua Naftalis, a former prosecutor in the U.S. United States Attorney for the Southern District of New York, who filed the lawsuit against Bankman-Fried.
“Going after his parents could be seen as a vengeful overreach,” said Samson Enzer, another former federal prosecutor in Manhattan. And the government’s lawyers may conclude that this “does not add any real value in furthering the prosecution’s goals beyond what has already been achieved through the government’s case against him.” [Bankman-Fried].”
Still, the scale of the fraud is “very significant,” said Andrew George, a white-collar defense attorney at Baker Botts, adding that it could force prosecutors to file additional charges. “That’s a lot of power that the government has in this case.”