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It's not just FTX's Sam Bankman-Fried. His parents also face legal trouble
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As disgraced FTX founder Sam Bankman-Fried gears up for the start of his trial on Tuesday, two people close to him are now facing legal trouble of their own: his parents.
For almost a year, Bankman-Fried's mom and dad, both of whom are well-respected professors at Stanford Law School, have accompanied their son to pretrial proceedings at a courthouse in Manhattan.
But now Barbara Fried and Joseph Bankman are being sued by FTX, which filed for bankruptcy late last year.
Lawyers are trying to claw back millions of dollars from them — in cash and gifts, including a $16.4 million villa in The Bahamas, where FTX was headquartered before filing for bankruptcy late last year.
The civil suit against Sam Bankman-Fried's parents alleges they helped run their son's crypto empire, and that for their work — some official, some unofficial — they were handsomely rewarded.
"Bankman and Fried wielded their influence and status as Bankman-Fried's parents to enrich themselves at the expense of the FTX Group," the plaintiffs said.
Having spent more than three decades on the Stanford faculty, Bankman and Fried have become institutions in their own right — important figures and beloved members of a close-knit community. They have won numerous awards for their scholarship and teaching, and many of their colleagues consider them close friends.
After FTX filed its lawsuit, NPR reached out to every professor at Stanford Law School for comment, and fewer than a dozen replied.
In an email, Robert Gordon, who has known the couple since the 1980s, said, "Anyone who knows Barbara Fried and Joe Bankman well will believe it absurd to think that they were engaged in self-dealing — since for many years they have given generously of their time and money to good causes."
Here's a closer look at Sam Bankman-Fried's parents.
Who is Joseph Bankman?
Joseph Bankman and Barbara Fried have taught at Stanford Law School since the late 1980s.
Bankman is, according to his official biography, "a leading scholar in United States tax policy," and at Stanford, he "teaches mental health law and writes on the intersection of law and psychology."
He is also a practicing therapist, who received a doctorate in psychology late in his career. He continues to have an affiliation with a practice called the Pacific Anxiety Group in Northern California, which says Bankman specializes "in the treatment of anxiety, depression, and adjustments in both teens and adults."
"I never intended to quit my day job," he told the Stanford Lawyer, a magazine for Stanford Law School alumni, in 2015. "But my scholarship and policy were venturing into behavioral psychology and the law, and I wanted to understand more about human behavior."
For years, Sam Bankman-Fried's father hosted a talk show on SiriusXM called "Stanford Legal" with his colleague Pam Karlan, who was his classmate at Yale Law School.
Bankman was a guest on NPR's Planet Money in 2017, and he came across as quick-witted and incredibly passionate about tax reform. During the interview, Bankman cracked a joke about his clothes. He pointed out his pants were stained, and his cuffs were frayed.
"I really love explaining things," he told Stanford Law School graduates in a 2008 speech, after he received the John Bingham Hurlbut Award for Excellence in Teaching — an honor Fried has won several times. "I love taking something opaque and make it seem a little less opaque."
What about Barbara Fried?
Sam Bankman-Fried's mother is an eminent academic in her own right.
Barbara Fried, who decided to retire from teaching during FTX's heyday, is widely known for her work on legal ethics.
She was an undergrad and graduate student at Harvard University in the 1970s and 1980s, when influential philosophers John Rawls and Robert Nozick were on the faculty, and throughout her career, Fried has grappled with their ideas about free will.
She has also written about how society treats criminals. In an article titled "Beyond Blame," which was published in 2013, she argued everybody is ultimately compromised.
"The reality is that we are all at best compromised agents, whether by biology, social circumstance, or brute luck," Fried wrote in the Boston Review. "Tellingly, the more information people have about the context of the crime, the person who committed it, and the circumstances he or she came from, the more nuanced are their views of moral responsibility."
In recent years, as Joseph Bankman branched into psychotherapy as a sort of second career, Fried turned to writing poetry and short stories.
"One unanticipated joy of writing fiction has been the opportunity it has offered me to escape from myself, and reimagine the world through the lives and eyes of others," she notes on her personal website.
Politics became another passion project, and in recent years, she co-founded a nonprofit organization called Mind the Gap, which was described in a Vox article as "a secretive group led by Stanford University academics" that "has unleashed millions of dollars in political spending from Silicon Valley."
What was Joseph Bankman's alleged involvement in FTX?
Joseph Bankman's and Barbara Fried's lives took another turn as FTX grew into a multi-billion dollar company, according to the lawsuit.
FTX's lawyers said Bankman was "a de facto officer, director, and/or manager" in Bankman-Fried's crypto empire before he joined it in an official capacity as a senior advisor to the FTX Foundation, its philanthropic arm.
In a 2022 interview with The FTX Podcast, a show FTX produced and has since deleted from YouTube, Bankman said his son had asked him for years to join his crypto empire.
"The company didn't have any lawyers," he said, of FTX's early days. "So, I think my utility there was pretty obvious."
"As early as 2018," plaintiffs said, Bankman began offering strategic advice — not only to his son, but to other executives. Bankman helped with hiring decisions. He vetted outside counsel. And he made decisions about where FTX should spend substantial amounts of money.
In 2021, Bankman went on leave from teaching at Stanford Law School to focus on FTX full time.
In that paid role, Bankman decided where and how FTX made charitable contributions. According to the lawsuit, on several occasions, he funneled money to Stanford University, where he worked. Those donations totaled more than $5.5 million.
In a statement, a spokesperson for Stanford University said the school plans to return those contributions "in their entirety."
"Bankman portrayed himself as the proverbial adult in the room — and was uniquely positioned to fulfill that role," FTX's lawyers said. "Bankman was virtually the only grow-up in the room, guiding the FTX Group and other executives, many of whom were recent college graduates in their mid-20s and had never before run a company, let alone managed billions of dollars."
What about Barbara Fried's involvement?
In their lawsuit, FTX's lawyers stress Barbara Fried "never had a formal position at the FTX Group," unlike Joseph Bankman. But she was, they note, "the single most influential advisor regarding Bankman-Fried's and the FTX Group's political contributions."
Ahead of the 2022 midterm elections, Bankman-Fried personally donated around $40 million to political candidates, committees, campaigns and causes, which made him one of the most powerful donors in the United States.
"We're ambitious and looking to make a splash," Bankman-Fried's brother, Gabe, told NBC News at the time.
Since then, federal prosecutors have alleged Bankman-Fried violated campaign finance laws, using straw donors — other individuals — to make some of his political contributions.
Citing correspondence between Bankman-Fried and his mother, FTX's lawyers allege Fried encouraged her son to disguise donations to Mind the Gap, the political nonprofit she co-founded.
What kind of rewards did they allegedly reap?
Joseph Bankman and Barbara Fried live in what has been widely described as a modest house on the Stanford University campus, but their lives changed as FTX grew, along with their son's wealth, according to FTX's lawyers.
The plaintiffs allege the company effectively bought them a $16.4 million house in The Bahamas. After Bankman expressed dissatisfaction with his $200,000 FTX salary, his son wired a $10 million cash gift to his parents, which FTX lawyers say came from Alameda Research, a crypto hedge fund Bankman-Fried founded.
According to the lawsuit, Bankman-Fried made it seem like he was borrowing money from Alameda. But according to the plaintiffs, "There is no indication that Bankman-Fried intended to repay the so-called loan." Bankman allegedly moved almost $7 million from his account in part of FTX's businesses into bank accounts he shared with Fried.
"We are so touched by this gift," Bankman wrote his son, in an e-mail message quoted in the lawsuit. "Mom is announcing retirement, which she would not have done otherwise."
FTX allegedly paid for the decoration and upkeep of the home in The Bahamas and according to the lawsuit, Bankman allegedly flew on privately-chartered jets, "expensed $1,200 per night hotel stays to the FTX Group, and even appeared in a Super Bowl commercial with Seinfeld writer Larry David months before the FTX Group imploded."
What has their response been to this lawsuit?
Joseph Bankman and Barbara Fried have retained separate lawyers, but in a joint statement, their attorneys push back against what FTX's lawyers allege, calling their claims "completely false."
Since their son was arrested in January, Bankman and Fried have kept a low public profile. Fried now has emerita status at Stanford Law School; she has stepped back from teaching. Bankman is on leave. A Stanford spokesperson said they both remain on the faculty.
Michael Klausner, who was Bankman's classmate at Yale Law School, and is now a colleague at Stanford, said he regularly sees Bankman on campus. They continue to have friends over for dinner despite what has happened over the last year.
"It hasn't led them to isolate themselves socially," Klausner said. "I see Joe often at the law school."
Klausner expressed sympathy for Sam Bankman-Fried, recalling first meeting the FTX founder as a six-year old.
"I hope Sam gets a fair hearing," he said, noting the case against Bankman-Fried has been a subject of conversation among him and his colleagues. "I think many of us disagree with the way the case has been handled from the moment of the prosecution on."
Fried told The New Yorker, the only media outlet to whom she has spoken since Bankman-Fried's arrest that "saving Sam is the major project of our lives."
But as she and Bankman prepare for the start of Bankman-Fried's criminal trial this week, they will now have to focus on their own defense, as well.
Copyright 2023 NPR. To see more, visit https://www.npr.org.
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