Stanford Law School professor Joseph Bankman is using a “multimillion gift” he received from his embattled son Sam Bankman-Fried to pay for his son’s high-priced legal defense, according to a new report this week.
The report from Forbes also alleges that this gift to the longtime Stanford academic was created using money taken from Alameda Research, the sister company of Bankman-Friend’s doomed cryptocurrency exchange FTX.
One-time billionaire Bankman-Fried claimed in November that he only had $100,000 in his bank account following the collapse of FTX, prompting questions about how he can afford the team of high-powered attorneys he’s hired to fight an array of criminal charges, including wire fraud, money laundering, securities fraud and bribery.
Bankman-Fried is accused of misappropriating billions of dollars in FTX customer funds to finance risky bets on his hedge fund, Alameda Research. The entrepreneur allegedly used the money to fund a lavish lifestyle and to funnel contributions to American politicians.
The 31-year-old entrepreneur appeared in federal court in Manhattan to plead not guilty to a new set of charges, which brings to 13 the total number of criminal counts he faces. One of the new charges alleges that he conspired to bribe Chinese government officials in 2021 with $40 million in cryptocurrency, the New York Times reported.
A source close to the 31-year-old entrepreneur told Forbes that his defense costs are likely to rise to the single-digit-millions range. But Forbes also reported that Bankman-Fried and his father have apparently found a way to cover that cost — a “large money gift” he received from his son in 2021.
Citing two sources with operational knowledge of both FTX and Alameda Research, Forbes said Bankman-Fried secured at least a $10 million loan from Alameda Research and sent that money to Joseph Bankman, using his lifetime estate and gift tax exemption. The gift essentially would have been tax free because the exemption covers the maximum amount someone is allowed to give in their lifetime with being taxed.
Forbes said that Bankman, a prominent attorney who specializes in tax law, did not respond to multiple questions about the alleged gift. Representatives for Bankman-Fried and his parents also did not immediately respond to a request for comment from the New York Post.
The case against Bankman-Fried, which federal prosecutors have called “one of the biggest financial frauds in American history,” has put intense focus on his parents, who were long known as esteemed members of Stanford’s faculty and well-regarded legal scholars.
Following the collapse of FTX and Bankman-Fried’s arrest in November, the once high-flying crypto financier moved back into his childhood home, located in faculty housing on the Stanford University campus. He’s living there under house arrest.
Bankman and his wife, Barbara Fried, have rallied to support the oldest of their two sons at all costs. “I’ll be spending substantially all of my resources on Sam’s defense,” Bankman wrote in an email to the executive of Chicago nonprofit executive whose donation from FTX was interrupted by the bankruptcy, Forbes reported.
In December, the Wall Street Journal reported Bankman and Fried “have told friends that their son’s legal bills will likely wipe them out financially.”
As Bankman-Fried awaits trial, his parents used their $1.8 million home to help to secure a $250 million bail package that allowed him to be released on his own recognizance.
They also relied on the kindness of Stanford friends to help keep their son out of custody. Stanford Law School dean emeritus Larry Kramer signed a bond pledging to pay $500,000 if Bankman-Fried violated the terms of his bail, while Stanford senior research scientist Andreas Paepcke signed a bond for $200,000.
Forbes wasn’t able to confirm how much Bankman-Fried will end up paying for his high-powered defense, which is led by Mark Cohen and Christian Everdell, who were part of the legal team that represented convicted sex offender and Jeffrey Epstein companion Ghislaine Maxwell, the New York Post said. Bankman-Fried also is receiving pro bono advice from David W. Mills, a criminal defense attorney who also is a close friend of his parents and their colleague at Stanford, a source told Forbes.
Bankman-Fried’s attorneys also have argued that federal prosecutors give their client access to 56 million Robinhood shares he bought in 2022 with money lent by Alameda Research, Forbes said. The shares, worth $485 million at today’s prices, were seized in January based on allegations that they were purchased with allegedly stolen customer funds.
Bankman-Fried’s legal expenses aren’t his parents’ only concern. Bankman and Fried’s reputations have been jeopardized by their son’s fraud scandal, and they’ve opted to step away from their duties at Stanford. Bankman is on leave from teaching at Stanford this quarter, while Fried told the Stanford Daily she had to decided to retire, though she could still teach classes in the future.
In addition, the couple have had to pay for 24/7 security around their five-bedroom home, while dealing with their own legal issues. Both Bankman and Fried have received subpoenas for personal records of any financial assets they received from FTX, according to Forbes.
Moreover, Bankman has hired his own white-collar criminal attorney, as investigators are looking into the extent of his involvement in FTX and its collapse, Puck writer William D. Cohan wrote in January.
“I’m convinced the dad is up to this in his eyeballs,” a person who has recently spent time with the family told Cohan.
Reuters also reported in January that Bankman is cooperating with prosecutors, though it’s not known what information he has provided. Reuters said that Bankman “closely advised” his son when he launched Alameda Research in 2017.
For the time being, Bankman and Fried at least don’t have to worry that their son will have to go back into custody. U.S. District Judge Lewis A. Kaplan had raised concerns that he violated the terms of his release by using his electronic devices to contact a potential witness in the case.
On Tuesday, Kaplan authorized a new set of bail conditions for Bankman-Fried, who generally can’t leave his parents’ home and must wear a GPS monitor strapped to his ankle. The New York Times said the new conditions significantly curtail his internet access by letting him use only two electronic devices — a laptop configured with limited internet access and a phone with no internet connection.
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