The evening before, he and a colleague had been working on their laptops in the oceanfront penthouse of a resort where he lived when his parents, who were visiting, called him into a bedroom. Minutes later, according to the colleague, a group of Bahamian law-enforcement officers, accompanied by members of the resort’s staff, strode into the apartment. One officer had a warrant for Bankman-Fried’s arrest.
Now, as the court hearing got under way, his parents, Joseph Bankman and Barbara Fried, sat in the third row, feeling shattered. Bankman told me later, “I think most parents would much rather die, frankly, than see their child accused of such horrible things.”
Bankman and Fried have long been popular faculty members at Stanford Law School, and known for their involvement in liberal causes. When Sam, their firstborn, was a child, they recognized him as being intellectually exceptional and emotionally atypical—an often isolated boy who entertained himself with baseball statistics and math puzzles. In his twenties, Sam achieved international fame as the head of FTX, a crypto company that he co-founded in 2019, and that promised to bring a measure of legitimacy to a nascent industry sometimes associated with money laundering and corruption. He shared a stage with Bill Clinton and Tony Blair, made the covers of Fortune and Forbes, and persuaded a range of prominent venture-capital investors to give his company hundreds of millions of dollars. Ten months before his arrest, FTX was valued at thirty-two billion dollars. A partner at Sequoia Capital, one of FTX’s biggest financial backers, posited in an online profile of Bankman-Fried, since deleted, that he might become the world’s “first trillionaire.”
The academic community in which Bankman-Fried was raised is a place where immense wealth is often discussed with suspicion, even when privately courted. But Bankman-Fried stood out from other young billionaires for his commitment to the effective-altruism movement, some of whose adherents believe in trying to earn as much as possible in order to maximize what they can give away. By the time of his arrest, he had become a major contributor to public-health and other causes, and one of the biggest personal donors in American electoral politics.
His parents come from modest backgrounds and have lived in the same house—a one-story bungalow on the Stanford campus—since the nineties; they describe themselves as “utilitarian-minded.” As academics, Bankman and Fried share an interest in using tax law as an instrument of social fairness. When Sam and his younger brother, Gabriel, were growing up, there was an ongoing household conversation about what it means to conduct an ethical life, and the brothers later worked together on philanthropic ventures that Sam funded. (Gabriel declined to be interviewed for this article.) As Larry Kramer, a former dean of Stanford Law School, told me, Bankman and Fried “loved that their children had these commitments that were so idealistic and powerful.”
The rewards of being Sam’s parents were financial as well as reputational. In 2022, he gave them a gift of ten million dollars; a lawsuit filed by FTX’s bankruptcy estate against Bankman and Fried this September claims that the money was “plunder[ed]” and came from an account that contained customer funds. Their attorneys said that the lawsuit’s claims are “completely false.”
Bankman and Fried visited Sam in the Bahamas frequently, sometimes staying at a sixteen-and-a-half-million-dollar, thirty-thousand-square-foot beach house in a gated community. In December, 2021, Bankman took leave from Stanford to work full time at FTX, providing legal, philanthropic, and tax advice for a salary of two hundred thousand dollars a year, plus expenses. Those expenses included twelve-hundred-dollar-a-night “hotel stays,” the lawsuit alleges.
“I’m in on crypto because I want to make the biggest global impact for good,” Bankman-Fried said in an ad that ran in The New Yorker. Like other crypto evangelists, he professed a belief in the power of digital currencies and blockchain technology to eliminate corporate middlemen from the financial system and provide life-changing economic opportunities to the poor. He also relied on slick advertising to do the talking. In one commercial, a plumber realizes that he, too, can make bank in crypto with FTX, and the football legend Tom Brady says, conspiratorially, “You in?”
In March, 2022, a month after an extravagant Super Bowl ad starring Larry David (with Bankman-Fried’s father hamming it up in the background in a powdered wig) told viewers not to miss out on FTX’s crypto, the Federal Reserve began raising interest rates, in part to combat inflation. As money became more expensive to borrow, the value of many cryptocurrencies plummeted. Regulators and reporters began revealing that companies in the industry had been lending money to one another in a closed loop to prop up the value of their assets. The allegation that Bankman-Fried created his own closed loop in order to deceive investors and the public is at the crux of the government’s case against him.
In addition to owning FTX, Bankman-Fried owned the majority of a crypto hedge fund called Alameda Research, which was run by Caroline Ellison, a trader whom he sometimes dated. On November 2nd, CoinDesk, an industry news site, reported that Alameda held almost fifteen billion dollars in cryptocurrency assets, a large chunk of which was in FTT—a digital token that FTX had issued. The disclosure raised questions about the true value of Alameda’s holdings and about the conflict of interest between the two supposedly independent companies. Changpeng Zhao (generally known as C.Z.), the C.E.O. of Binance, a crypto competitor, wrote a series of skeptical tweets indicating that he was dumping his FTT. Alarmed, FTX customers withdrew six billion dollars in just three days. By November 8th, FTX was so broke it stopped honoring withdrawal requests.
Some of Bankman-Fried’s employees quit, and he huddled with those who remained, trying to calm investors and raise money to save the company. Meanwhile, a former FTX employee told me, “the parents were freaking out and asking, ‘What about your legal safety?’ ”
On November 11th, under what Bankman-Fried describes as pressure from FTX’s lawyers, he agreed to relinquish control of the company to a new C.E.O.—a decision that he regretted immediately and tried in vain to reverse. The new C.E.O., quickly installed, was John Jay Ray III, a bankruptcy lawyer who had overseen the dissolution of Enron; he filed for Chapter 11 and began the process of formally winding FTX down.
Shortly after Bankman-Fried’s arrest, the Commodity Futures Trading Commission said in a lawsuit that he’d caused the loss of more than eight billion dollars in customer assets. Among those reported to be affected were Tom Brady; his ex-wife, the supermodel Gisele Bündchen; the basketball star Steph Curry; the billionaire oil investor Robert Belfer; the tennis star Naomi Osaka; the former Trump spokesman Anthony Scaramucci; a teachers’ pension fund; and many ordinary investors, including construction workers, small-business owners, and college students.
In Magistrates Court, Bankman-Fried stared straight ahead as his attorney argued for his release while his extradition was negotiated, noting that he had stayed put and tried to “fix things” for customers when he could have fled the country. A local prosecutor countered that Bankman-Fried was a flight risk, with the means to charter a private plane. When the prosecutor referred to Bankman-Fried as a “fugitive,” his mother laughed darkly. Bail was denied, and eight days later he was extradited to the United States.
Bankman-Fried’s trial is scheduled to begin in New York in early October, and until recently he was preparing for it while under house arrest in California, at his childhood home, which is surrounded by redwood trees and cacti. His parents were back to taking care of him and working to bolster his spirits, as they’d done when he was a child, but now they were also scrambling to find legal escape routes from circumstances they say they had failed to anticipate: that their son, now widely considered a crypto villain, would be facing life in prison, and that they would be accused of being complicit.
by Sheelah Kolhatkar, New Yorker | Read more:
Image: Keith Negley; Source photograph from Getty
[ed. Well, we know how that turned out. You wouldn't want to tar an entire institution for the crimes of a few, but it is ironic that two of the biggest grifters in recent memory/history (Elizabeth Holmes; SBF) both came out of Stanford. And that SBF's parents were 'ethics' experts there. Even the the school's president has been implicated in improprieties (falsifying data). Could it partly be tech's 'get rich quick'/'smarter than everyone else' ethos? (probably); or something more intangible - like an elitist perception of invulnerability? (maybe). Perhaps a lot of other things too (its meritocracy system; connections to capital and important industries, scientific societies, political influence, etc.).]
