The release this week of disgraced cryptocurrency executive Sam Bankman-Fried from federal custody on a $250 million bond has raised questions about the federal bail process and why such a high-profile defendant could go free.
The bond essentially amounts to a promise to appear in court if necessary; it does not force Mr. Bankman-Fried, who is accused of numerous crimes related to his dealings with the cryptocurrency exchange he founded, to pay $250 million.
No money has changed hands and will not change hands unless Mr. Bankman-Fried fails to show up for court or is found to have violated other terms of the judge.
In that case, his parents’ home in Palo Alto, California, which was used to secure the bond, could be seized by the government. The four people who must co-sign the bond, including a non-family member, would snag the rest of the $250 million.
Two of those people are the parents of Mr. Bankman-Fried, law professors at Stanford who supported their son in promoting his exchange, FTX. It is not known who the other two co-signers are.
What you need to know about the collapse of FTX
What is FTX? FTX is a now bankrupt company that was one of the world’s largest cryptocurrency exchanges. It enabled customers to trade digital currencies for other digital currencies or traditional money; it also had a native cryptocurrency known as FTT. Based in the Bahamas, the company built its business on risky trading options that are not legal in the United States.
A spokesperson for Mr Bankman-Fried declined to comment.
How is it possible that such a high-profile defendant was released without having to pay any money?
Mr. Bankman-Fried was in the Bahamas when he was charged, and extradition can be a very complicated process, leading to a lengthy legal battle. In court on Thursday, prosecutor Nicolas Roos said that if Mr Bankman-Fried had not agreed to extradition, it was “almost certain” the government would have sought his detention.
Sabrina Shroff, a former federal defender, said: “I suspect this was an agreed bail package before he ever left the Bahamas. Extradition from the Bahamas is difficult and the defendant may have had ample opportunity to challenge the extradition, which could have taken years.”
$250 million seems like a really high number. Is the?
Yes. It is highly unusual for such a large bond to be placed.
Bernie Madoff received a $10 million bail deal in 2008, as Billy McFarland, the entrepreneur who created the disastrous Fyre Festival, was released on $300,000 bail. Thomas J. Barrack Jr., a friend of Donald J. Trump who was indicted – and eventually acquitted – with illegal lobbying in the United States on behalf of leaders in the United Arab Emirates, is one of the few defendants in recent memory whose bail was as high as Mr. Bankman-Fried’s.
But if the crypto executive complies with the terms of the court, the amount is largely symbolic.
However, those terms are numerous and include:
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Mr. Bankman-Fried has to hand in his travel documents and stay with his parents.
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He may not open new lines of credit or start another business.
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He may not enter into financial transactions in excess of $1,000 except to pay his legal fees.
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He agrees to be electronically checked.
His parent’s house has either already been appraised, or is now likely to be, and a lien on the house must be placed before January 12.
Mr. Bankman-Fried’s parents have also come under scrutiny for their relationship with FTX. His father, Joseph Bankman, a tax expert, actually worked for the company, while his mother, Barbara Fried, counted her son among the donors within a political advocacy network she orchestrated.
The aftermath of FTX’s demise
The sudden collapse of the crypto exchange has stunned the industry.
What does this have to do with New York’s bail law?
Nothing.
New York’s bail law, which passed in 2019 so that defendants charged with certain minor crimes would not have to pay cash bail, has been the subject of considerable controversy. But Mr. Bankman-Fried’s case is federal, so he’s not subject to that law.
Defense lawyers who observed the case said there was one point of similarity, however, between the spirit of that law – which sought, in part, to prevent bail being used to unnecessarily detain defendants – and Mr Bankman-Fried’s release . Ms Shroff said the presumption of innocence was embedded in the Federal Bail Reform Act of 1966which regulates the bail law.
Mr Bankman-Fried “should get bail,” she said. “In fact, most people facing federal criminal charges should have the ability to fight their charges from the outside. Detention serves to break the spirit and strength of clients and that is not the purpose of bail.”