On Monday, FTX Debtors—the court-appointed managers of what’s left of SBF’s collapsed ‘crypto’ empire—filed a complaint [link to attached PDF] in the U.S. Bankruptcy Court for the District of Delaware against Allan Joseph Bankman and Barbara Fried. The complaint accuses the FTX Group of being “a self-described ‘family business’ … fueled by fraud perpetrated by and for the benefit of a group of insiders.”
The complaint claims SBF’s parental units “exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars, and knowingly at the expense” of FTX’s customers. Bankman in particular “played a key role in perpetuating this culture of misrepresentations and gross mismanagement.”
Throughout his FTX tenure, Bankman was “well-placed to insist on and implement internal controls and raise alarms about the misconduct” at FTX but “instead, stayed silent and in at least one instance, helped hush a complainant whose allegations threatened to expose the fraud within the FTX Group.”
SBF’s mother Fried, another Stanford Law professor, is quoted describing herself as her son’s “partner in crime of the noncriminal sort.” Fried is described as “the single most influential advisor” regarding SBF/FTX’s political contributions, with Mind The Gap (MTG)—a political action committee Fried co-founded and managed—among the primary recipients of contributions made with stolen FTX customer funds.
Bankman, a Stanford Law School professor, was formally retained by his son as pro bono counsel in January 2021 and declared as early as February 2021 that he was “very involved” in his son’s business. This included being an early investor in Alameda Research, FTX’s affiliated market-maker, the launch of which preceded FTX.
But Bankman was informally providing “legal and business advice” to Alameda as early as 2018, when he “connected” SBF with what became its sole accounting firm. By 2019, Bankman was referring to the organization of the FTX Group as “our corporate structure.” [Emphasis added.]
Internal documents identified Bankman as one of only seven individuals belonging to the FTX Group’s Management Team (others included SBF, attorney Daniel Friedberg and CTO Zixiao “Gary” Wang). The general counsel for FTX.US—FTX’s U.S.-licensed exchange—referred to Bankman as a “strategic advisor to and general overseer of the FTX businesses.”
As further evidence of Bankman’s clout, the complaint offers examples in which he appears to act without SBF’s direct involvement, telling other execs that “I don’t think we necessarily have to involve Sam right now.” Other communications show Bankman saying that, after a discussion with SBF, “we agreed that things like [charitable giving] would get shunted to me,” including whether donated funds would come “from FTX or Alameda.”
Bankman was aware that the FTX Group was assuming significant liabilities as early as 2021. Some of these liabilities involved questionable loans to SBF and other top execs, often with zero collateral. But rather than take steps to shore up FTX’s balance sheet, Bankman queried FTX’s legal representatives in November 2021—one year before FTX et al filed for bankruptcy protection—as to “how assets including primary residence can be structured to be bankruptcy-remote.”
At the same time, Bankman suggested FTX founders “put money into property in the Bahamas,” apparently based on his view that such properties would be shielded from being clawed back by a U.S. bankruptcy court.
Bankman also pushed back on efforts to hire outside counsel, reminding FTX management how “we are always trading off tax issues among individuals and entities.” The legal complaint cites Bankman discussing specific examples of this, indicating that Bankman “had unfettered access to the FTX Group’s financials and corporate structure” and thus would have understood that the Group’s individual entities were commingling financial resources.
Who needs college?
By December 2021, Bankman officially took leave from his Stanford duties to focus solely on FTX at an annual salary of $200,000. But by January 2022, Bankman was complaining to administrative staff that he was “supposed to be getting $1M/yr, starting in December.” Bankman then emailed his son to complain about his low salary, adding that he was “Putting [SBF’s mom] Barbara on this.” (Guess we now know who wears the pants in the family.)
Two weeks after this email, SBF granted his parents $10 million from Alameda funds (aka FTX customer funds) while Bankman also received lucrative stock options in the parent companies of both FTX and FTX.US.
Bankman shared FTX’s wealth with other family members, including his sister, who was paid $14,000/month to organize a fiasco known as the FTX Million Dollar Hackathon and Crypto Summit. Staged in the Miami Heat Arena sponsored by FTX, the event filled only 1,200 of the arena’s 19,000+ seats at a cost to FTX of around $2.3 million.
Bankman likewise made it rain for Stanford, which received over $5.5 million from FTX between November 2021 and May 2022. But while Stanford understood that Bankman and his family were the source of this largesse, Bankman nonetheless made efforts to publicly distance himself from some of the donations, saying “it seems too close to home for me.”
On Tuesday, a Stanford spokesperson told SFGATE that the university has “been in discussions with attorneys for the FTX debtors to recover these gifts and we will be returning the funds in their entirety.”
Meanwhile, Bankman was living large on FTX’s dime when he traveled, including $1,200-per-night hotel stays. Throughout, despite Bankman’s knowledge of FTX’s antics, he took no efforts to bring the company into compliance, choosing instead to feather his own nest and hope against hope that Judgment Day would never arrive.
Lie down with dogs…
Bankman also “advocated” for hiring Friedberg as the FTX Group’s general counsel, despite Friedberg already being infamous for helping to orchestrate the cover-up of a multi-million-dollar insider theft at online poker company Ultimate Bet in the mid-2000s.
Despite this checkered past, or possibly because of it, SBF went along with his father’s push to hire Friedberg. In March 2021, Bankman declared that he’d “interviewed lots” of law firms interested in representing SBF’s companies, adding that “I felt I had a lot riding on that decision.”
Friedberg’s role in facilitating SBF’s criminal activities has been well documented, including the dismissal of a junior FTX attorney who’d caught on to the group’s efforts to commit bank fraud in the United States. The complaint against SBF’s parents sheds new light on Bankman’s role in similar defensive measures.
For instance, when a now-deceased attorney (Pavel Pogodin) accused SBF et al of digital asset price manipulation, money laundering and other crimes, SBF forwarded the matter to Bankman and Friedberg. Instead of investigating Pogodin’s claims, Bankman asked Friedberg “whether or not there are any disciplinary actions” they could take against the attorney.
Much of this section of the complaint is redacted, but concludes with Bankman congratulating Friedberg on his handling of this matter: “You’re amazing, Dan. I hope you can take some pride in having accomplished all this.”
Fried’s academic output, including compositions titled “The Limits of Personal Responsibility and Beyond Blame,” has already been cited as possibly contributing to SBF’s ability to construct alternate narratives in which all his actions are justified.
While Fried appears to have avoided direct involvement in her son’s business, she considered herself her son’s “point person on [his] political investments.” Internal communications reveal that SBF made sure his underlings understood that his mom would be directing the group’s political contributions and they should follow her directions.
The complaint alleges that Fried was sufficiently “concerned with the optics of her son and his companies donating money to the organization she co-founded and other causes she supported” that she “encouraged” her son and other FTX execs—including Ryan Salame, co-CEO of FTX Digital Markets, and Nishad Singh, FTX engineering director—to engage in straw donations that violated U.S. campaign finance disclosure rules.
The complaint notes that Fried sometimes “committed” SBF and Singh to fund programs supported by her MTG political action committee. On at least one occasion, Fried hit up SBF and Singh for cash that she’d “committed unilaterally” on her son’s behalf.
The complaint details how Fried understood the need to “protect [SBF] and FTX” from campaign finance blowback when it came to deciding whose name went on what donation. Both Salame and Singh have since pleaded guilty to conspiring to commit campaign finance law violations as well as knowing that the millions they were donating was the rightful property of FTX customers.
All in the family
In October 2021, shortly before SBF gave his parents that $10 million in cash, Fried emailed her son regarding the specifics of how that ‘gift’ might be constructed. Her husband later proposed that the “easiest way” would be to “add 10M to the 250M loan Sam has from Alameda. Then Sam gifts the money.” Bankman went on to say that SBF could choose to ‘cancel’ this $10 million at a later date.
In the end, this gift was made via a January 24, 2022, deposit to an Alameda account on the FTX.US exchange, then almost instantly transferred to Bankman’s account on the same exchange. Nearly $6.8 million was withdrawn to Bankman and Fried’s joint bank accounts shortly thereafter.
At the time of FTX’s bankruptcy, Bankman’s FTX.US account contained $2.1 million in cash and over 9,449 Solana (SOL) tokens worth nearly $153,000 at the time. It was previously reported that the bulk of this $10 million gift was being used to help fund SBF’s legal defense.
In a subsequent email to SBF thanking him for this gift, Bankman notes that Fried was now announcing her retirement from Stanford, “which she would not have done otherwise.” None of the FTX Group’s accounting contains any reference to SBF’s parents being the ultimate recipients of this ‘gift.’
But SBF’s generosity with other people’s money knew no bounds. In early 2022, SBF put his parents’ name on the deed of a $16.4 million property in the Bahamas known alternately as ‘Blue Water’ or ‘Old Fort Bay,’ paid for, again, with FTX funds. SBF’s parents also used around $90,000 in FTX Group funds to furnish/clean/maintain the property in the few months they occupied the property before FTX went under.
While internal documents showed the property had been “reconveyed [sic] to/purchased for employees,” SBF’s parents were the property’s only inhabitants. And SBF’s parents clearly understood that it was their property, both of them routinely describing it as “our house” or “the house you helped us buy” in emails to FTX execs.
Demands and denials
The complaint seeks the disgorgement of all ill-gotten gains that Bankman and Fried received via their fraudulent ‘family business,’ along with punitive and compensatory damages, legal fees, court costs and more. (An apology might be nice, as well.)
In further proof that the apple doesn’t fall far from the tree, attorneys for Bankman and Fried issued a statement on Tuesday saying the allegations in the complaint are “completely false” and “a dangerous attempt to intimidate” the couple and “undermine the jury process just days before their child’s trial begins.” Is it any wonder that SBF still maintains that he hasn’t done anything wrong?
We’ll close out this sordid saga by borrowing a line from the sublime Miller’s Crossing, cuz it seems all too appropriate: “They probably had grifter parents and grifter grandparents and someday they’re each gonna spawn little grifter kids.”
See? That wasn’t so hard
In a more positive note, Bloomberg reported last Friday that three of FTX’s former celebrity pitchmen have reached settlements in civil suits filed by the exchange’s duped investors. Jacksonville Jaguars hirsute quarterback Trevor Lawrence and YouTube ‘influencers’ Tom Nash and Kevin Paffrath all reached deals with the plaintiffs, although terms of these settlements weren’t disclosed.
No such deals have so far been reached with FTX’s higher-profile promoters, including basketball greats Shaquille O’Neal and Steph Curry, quarterback Tom Brady, tennis ace Naomi Osaka and comedic curmudgeon Larry David.
No rest for the wicked
Finally, SBF’s criminal trial is scheduled to get underway on October 3 and he learned Tuesday that he likely won’t be released from the Manhattan Detention Center before then. SBF spent most of 2023 under house arrest at his parents’ California home following his extradition from the Bahamas last December, but his bail was revoked in August due to his ongoing efforts to intimidate/collude with potential witnesses against him.
U.S. District Judge Lewis Kaplan denied SBF’s appeal of this revocation, prompting SBF’s attorneys to appeal to the 2nd Circuit Court of Appeals. On Tuesday, a 2nd Circuit panel of judges effectively shrugged, saying only that they would take both sides’ arguments under advisement.
Also, Tuesday saw U.S. Attorney for the Southern District of New York Damian Williams ask Kaplan if they could extend the first week of the trial to include Friday, October 6. The following Monday is a federal holiday (Columbus Day) and if Friday is left off the docket that means a four-day break that could inconvenience out-of-town witnesses. Williams noted that SBF’s team opposes this request. However, given SBF’s lousy batting record and Kaplan’s increasingly dim view of SBF’s antics, SBF should expect to be in court on the 6th.
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