People inside and out of the crypto community want to know how former FTX CEO Sam Bankman-Fried, who claimed less than four weeks ago to be down to his last $100,000 after losing most of his $26-billion net worth, managed to post $250 million in bail.
The answer is he didn’t.
After being extradited to the U.S. this week from the Bahamas, Bankman-Fried was released from custody by a New York judge under a $250 million bond agreement that will enable him to spend the holidays at his parent’s Palo Alto home.
No one had to pay a dime for his release, and at this point, no cash is owed yet. Bankman-Fried’s release agreement is an appearance bond that establishes a $250 million personal recognizance bond. In U.S. law, recognizance entails a promise to comply with specific restrictions while awaiting trial, and to appear in court when ordered. No upfront payment or bail bond arrangement is required, Decrypt reported.
SBF faces eight criminal charges including money laundering, violating campaign finance laws and wire fraud. The bond is believed to be the “highest-ever pretrial bond,” assistant U.S. attorney Nick Roos said during a hearing Thursday.
His crypto exchange, the second largest after Binance, was worth an estimated $30 billion before it all started to implode. FTX, sister company Alameda Research and dozens of subsidiaries filed for bankruptcy in the U.S. on Nov. 11. At least $1 billion in FTX customer funds were unaccounted for, Reuters reported.
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“This was a fraud of epic proportions,” Roos said. “If that was the only test, detention would likely be appropriate. But he voluntarily consented to extradition. That should be given weight.”
The $250 million bond is orders of magnitude higher than Bernie Madoff’s $10 million stipulation in 2008. SBF has been compared to Madoff, who pulled off the largest-ever Ponzi scheme — a type of investment fraud in which investors are lured by promises of artificially high rates of return with little or no risk, and earlier investors are paid with funds from more recent investors. Madoff defrauded thousands of investors to the tune of $64.8 billion. He was sentenced to 150 years in prison and forced to forfeit $170 billion as restitution. He died in prison on April 14, 2021.
SBF will be under house arrest with electronic location monitoring. The court has to sign off on spending transactions of more than $1,000, excluding attorney fees. He will also get mental health and substance abuse treatment while awaiting trial. He also has firearms restrictions. If he violates the terms or skips the trial, the $250,000 will be called due. The first item of collateral is his parents’ home.
SBF had to put up 10 percent of the bail amount — $25 million — as collateral, but no actual payment was needed. The only two signatures are SBF’s dad and mom, Allan Joseph Bankman and Barbara Fried. As the co-signers on the bond, they are on the hook if SBF fails to appear in court, according to Miriam Baer, vice dean and centennial professor of law at Brooklyn Law School.
At a hearing Thursday in New York, federal prosecutors said that SBF’s bond was the highest ever pre-trial bond.
If SBF violates the terms of his bond and the bail comes due, who will pay? While speculation is rampant as to the value of the parental home, Reuters reported that they and FTX executives bought $300 million in property in the Bahamas over the past two years. Who has custody of those assets remains unclear.
The bail of Michael Milken, charged with racketeering and securities fraud in 1989 — was set at $250 million, about $570 million in today’ dollars. He pleaded guilty to six felony counts and was sentenced to 10 years in prison and $600 million in fines.