Saturday, February 4, 2023
Sam Bankman-Fried’s Parents Used Their Stanford Home To Bail Him Out
Los Angeles Times, Sam Bankman-Fried’s Parents Used Their House to Bail Him Out. But They Rent the Land from Stanford:
Shortly before Christmas, FTX founder Samuel Bankman-Fried, indicted on federal charges of fraud and money laundering, was released on a $250-million bail bond that was secured by his parents’ Palo Alto-area home.
The size of the bail bond — 25 times bigger than Bernie Madoff’s — garnered considerable attention. The prosecution termed it “the largest ever pretrial bond.” What hasn’t drawn notice is the fact that Joseph Bankman and Barbara Fried, who are professors at Stanford Law School, are not typical homeowners. Their property is a faculty home on the Stanford campus itself. Stanford owns the land, and Bankman and Fried lease it.
Although the couple told the court that the five-bedroom, 3,000-square-foot home is worth $3.55 million, the restrictions that come with owning a home on Stanford property make it difficult to gauge its market value via conventional means. Were Bankman and Fried ever to sell their house — or were the government to take possession of it, in the event of a bail violation, and then have to sell it — the pool of potential buyers would be limited to other eligible Stanford faculty. Whatever the scenario, a sale would have to go through Stanford.
It’s a curious circumstance that underscores the wide latitude granted in bail proceedings to wealthy, white defendants, in sharp contrast to the unforgiving terms that often keep poor people of color behind bars while they await trial.
“Prosecutors treat these white-collar cases totally differently than other cases,” said Alison Siegler, a University of Chicago Law School professor. “There’s a lack of equity in all of this.”
While using a Stanford faculty home to secure bail may be unusual, the arrangement is perfectly legal. Likewise, there is nothing unorthodox in the size of a bail bond greatly exceeding the value of the assets used to secure it. The $250-million figure ascribed to Bankman-Fried’s bond, experts said, was essentially just an arbitrary number.
“The goal is really for the parents to do everything possible to put themselves on the line,” said Columbia University Law School professor Daniel Richman. Putting up the family home for bail is a way to secure the commitment of people close to Bankman-Fried who will help make sure he doesn’t flee, said Richman, a former federal prosecutor. “It’s almost symbolic in the sense that they’re taking their most valuable asset and pledging it.” ...
“Under the terms of their ground lease with the university, Joseph Bankman and Barbara Fried have the right to use their leasehold interest as collateral for the bond, just as they can encumber their leasehold interest with a mortgage. Neither situation requires approval from the university,” Dee Mostofi, assistant vice president for external communications, said in a statement. “Accordingly, the university did not give approval for Joseph Bankman and Barbara Fried to use their leasehold interest as collateral for the bond as no approval was required under their ground lease.” ...
In “Freedom Denied,” a recent report led by Siegler, the University of Chicago professor, court watchers found that judges were routinely unlawfully jailing poor people and imposing excessive financial conditions, with people of color significantly more likely to be jailed unlawfully on cash bails that they could not afford. ..
Under the federal Bail Reform Act of 1984, jailing people before a trial is supposed to be the exception, used only to ensure community safety and that defendants appear in court. But in the decades since, pretrial detention rates have skyrocketed.
Siegler noted that the prosecution took a very different approach. The government said that Bankman-Fried had agreed to extradition from the Bahamas and had “family and community ties” and that risk to the community wasn’t a concern.
“This is an insane transcript to read because the argument the government is making is typically the kind of argument the defense would be making,” Siegler said. “Here, the prosecution is advocating to the judge to let this guy out pending trial. Usually, they’re advocating just the opposite.”
From the transcript, Siegler noted that it appeared that Bankman-Fried’s lawyers probably negotiated with the government to agree to extradition in exchange for pretrial release in a bail package. ...
Currently, more than 100,000 people remain in federal detention awaiting trial. According to Department of Justice data, 99% of people charged with a federal crime and released pretrial show up in court, and 98% do not commit crimes.
“It’s so rare that anybody doesn’t comply with these conditions when they’re given the chance to be released and go back to their family,” Siegler said.
Prior TaxProf Blog coverage:
- Vox Recode, Stanford Law Profs' Son Is A 'Vegan Crypto Billionaire' (Apr. 19, 2021)
- Los Angeles Times, Stanford Law Profs' Son — A 'Vegan Crypto Billionaire' Megadonor — Seeks To Change Washington, D.C. (Aug. 13, 2022)
- New York Times, The Stanford Law Prof Parents In The Middle Of FTX’s Collapse (Dec. 13, 2022)