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Aristide Economopoulos

Sam Bankman-Fried’s parents spent many of their waking hours in October seated on a wooden bench in a Manhattan courtroom, a few feet behind the former cryptocurrency mogul, watching as federal prosecutors convinced a jury their son had orchestrated one of the biggest financial frauds in history.

Now, as Bankman-Fried awaits sentencing that could send him to prison for the rest of his life, Joseph Bankman and Barbara Fried — formerly eminent Stanford Law professors — should worry about their own potential criminal exposure for their roles in their son’s collapsed crypto empire, legal experts say.

The couple already face a challenge in civil court from the creditors of FTX, the bankrupt crypto exchange that Bankman-Fried co-founded. He gave his parents a $10 million cash gift and bought them a $16.4 million property in the Bahamas that FTX investors and customers have sued to recover, according to the lawsuit.

Beyond the financial windfall, both parents’ level of involvement with their son’s work will likely bear on their legal vulnerability. Bankman, a tax expert and clinical psychologist, served as an adviser to his son on business matters as far back as 2018 and remained a key member of his inner circle through the exchange’s implosion a year ago, according to the civil suit and evidence from the criminal trial. Fried, an ethics scholar and co-founder of a Democratic fundraising organization, advised her son on concealing campaign donations in a scheme that elicited guilty pleas from two of his top deputies, according to the civil suit.

Lawyers for Bankman and Fried have said in a statement the claims in the civil suit are “completely false.” Neither has been charged with any criminal wrongdoing. A spokesman for the U.S. attorney’s office in Manhattan declined to comment.

But the fate of Bankman-Fried’s parents remains a loose thread in the FTX saga. He received “counsel from his parents this entire time, so they’re very, very close to the heart of this story, unfortunately,” said Mark Bini, a former federal prosecutor specializing in financial crime. “The closer a person is to the main defendant, the more likely that a judge or jury would find there was a meeting of the minds on intent.”

“Their proximity could lead to significant civil exposure and possibly even criminal exposure,” Bini added.

Prosecutors have wide latitude to determine whom they charge. In addition to the successful prosecution of Bankman-Fried, government attorneys have secured guilty pleas from four of his top executives. And Bankman-Fried himself is set to stand trial again in March on separate charges that he committed bank fraud and bribed Chinese officials. As prosecutors continue to review the matter, they could turn up evidence that would compel them to charge the parents, legal experts say.

Criminal liability is “not an on-off switch, but a spectrum,” said Renato Mariotti, another former federal prosecutor focused on financial crime.

“Anyone who is in the mix … or intimately involved with an individual committing a crime and on the radar of federal prosecutors are in a danger zone,” he said. “And Sam’s parents certainly should be concerned about the possibility of charges.”

In the wake of FTX’s collapse last year, Bankman-Fried <a href="https://www.nytimes.com/2022/12/12/technology/sbf-parents-ftx-collapse.html" target=_blank>said</a> his parents “weren’t involved in any of the relevant parts” of its operations.

The civil suit filed in September by John J. Ray, the corporate wind-down specialist managing FTX through its bankruptcy, claims otherwise.

The suit notes Bankman repeatedly referred both to FTX and Alameda Research, Bankman-Fried’s crypto-focused hedge fund, as a “family business,” and it argues the parents “exploited their access and influence within the FTX enterprise to enrich themselves.”

The couple “either knew — or ignored bright red flags revealing — that their son, Bankman-Fried, and other FTX Insiders were orchestrating a vast fraudulent scheme,” the suit alleged.

Officially, Bankman served as an outside adviser to his son until joining the payroll of FTX’s U.S. arm in December 2021, 11 months before its collapse, as a senior adviser to the company’s charitable foundation. But in practice he took on a much broader portfolio, testimony and evidence presented at the criminal trial suggest.

Bankman counseled FTX engineering director Nishad Singh on a $477 million loan he took from the company, Singh testified. Bankman also participated in 16 Signal group chats with his son and other top executives about company business and was on-hand at FTX’s Bahamas headquarters as it collapsed, accompanying his son to a meeting with the country’s securities regulator, a Bahamian lawyer retained by FTX testified.

The civil suit also points to Bankman’s inside role. As early as September 2019, Bankman “failed to investigate” a whistleblower complaint that “threatened to expose the FTX Group as a house of cards,” the suit alleges. His status afforded him perks such as private jet flights, $1,200 hotel stays and a cameo in an FTX Super Bowl commercial opposite Larry David.

Fried, meanwhile, appeared to <a href="https://www.washingtonpost.com/business/2023/10/02/bankman-fried-fraud-ftx-trial/" target=_blank>coach</a> her son on how to obscure the source of campaign funds as part of a $100 million political-influence-buying operation, the civil suit alleges. Singh and Ryan Salame, former co-CEO of FTX’s Bahamian subsidiary, already have pleaded guilty to violating campaign finance law for their part in that scheme by making donations that Bankman-Fried reimbursed.

In an email Fried sent Bankman-Fried in August 2022, she pointed to a contributor who would “only give in a non-disclosed form, and I would strongly urge you to do the same — or substitute someone else’s name,” according to the civil suit. She emailed her son again a week later to “counsel strongly against giving in a disclosed form under your own name.”

Bankman-Fried replied he “agreed that it doesn’t make sense for me to give disclosed.”

Both Fried and Bankman were fixtures at their son’s trial, often expressive in a way that contrasted with Bankman-Fried’s stoicism. Bankman would regularly flash his son a thumbs up even in the trial’s tensest moments; Fried, on multiple occasions, broke into tears during breaks in testimonies, her husband’s arm wrapped around her.

Government attorneys considering charges against Bankman and Fried would need to weigh several factors, former prosecutors say. They would reflect on their view of the parents’ culpability, the strength of the evidence against them, and the extent to which the broader cause of justice would be served by expending limited resources pursuing them.

“There’s a complicated sort of decision matrix to prosecuting parents for being involved in their son’s crime when the question is really, ‘How much did the parents know?’” said Joshua Naftalis, a former prosecutor in the U.S. attorney’s office for the Southern District of New York, which brought the case against Bankman-Fried.

“Going after his parents could be seen as a vindictive overreach,” said Samson Enzer, another former federal prosecutor in Manhattan. And government lawyers could decide it would “add no real value in terms of furthering the goals of prosecution beyond what has already been accomplished through the government’s case against [Bankman-Fried].”

Yet the scale of the fraud is “very significant,” said Andrew George, a white-collar defense attorney at Baker Botts, adding that could compel prosecutors to pursue additional charges. “That’s a lot of power the government has in this case.”

Columbia University, BA in American history

Tory Newmyer covers economic policy and the intersection of Wall Street and Washington. He previously worked at Fortune, where he spent seven years as the magazine's Washington correspondent.

Tory Newmyer

Columbia University, MS in Journalism; St. Olaf College, BA in English

Eli Tan is a business reporter at The Washington Post. He lives in Washington, D.C.

Eli Tan

Bankman-Fried’s parents could face their own legal perils, experts say

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