All in the Bankman-Fried Family
Ignorance is bliss... Or in this case... Ignorance is money you can give to charitable and political causes of your choice!
Throughout the last month, and particularly in the last week, Sam Bankman-Fried (SBF), the disgraced founder of the FTX crypto exchange and the Alameda Research hedge fund, saw his once $26 billion net worth evaporate and found himself inside a prison in the Bahamas that is known for being extremely overcrowded and unsanitary.
While SBF was initially going to fight extradition charges, he has reversed course over the last few days and decided to accept his fate. What happens next will take at least months to play out — the public will find out more about how this indictment was pulled together so quickly as we approach trial and more indictments get handed out. There was already speculation based on certain information in SBF’s indictment that some of the FTX and Alameda former employees have already flipped, including most notably Alameda CEO and former lover of SBF, Caroline Ellison, who was spotted in New York City just a couple of weeks ago.
One clip that has gone especially viral in the wake of FTX’s collapse is one of Kevin O’Leary of “Shark Tank” fame in which he discusses his relationship with FTX, “I have to disclose, I’m a paid spokesperson to FTX and a shareholder there too … Big advocate for Sam because he has two parents that are compliance lawyers. If there’s ever a place I could be that I’m not gonna get in trouble, it’s gonna be at FTX.”
Many people have focused on the last part of that quote but the mention of SBF’s parents being compliance lawyers is what caught my attention. Even before the collapse, SBF’s parents, Joseph Bankman and Barbara Fried, had been under some scrutiny in the crypto community. Look at SBF describe his mother’s influence on him and his journey as an “effective altruist.”
Effective altruism (EA) has definitely taken a reputational hit in the last months since FTX’s collapse, including SBF himself admitting why he truly peddled the ideology:
There’s something particularly cynical about SBF admitting the farce while his mother built her career on EA. Does she feel the same way? There’s really no way to know, but we can look at her decisions in the years leading up to FTX’s collapse and her son’s admissions. So let’s focus on his mother, father, and brother — all of whom almost assuredly benefitted from the money being siphoned from FTX customers.
The New York Times published an article detailing the family’s role in advising SBF as well as spending his money. While the piece does provide key insight into the endeavors of the family, the writers also seem to try to provide some cover at the end of the piece, complete with a hilarious kicker quote:
Colleagues and family acquaintances are wrestling with what to say the next time they run into Mr. Bankman and Ms. Fried. Their son has widely been compared to Bernie Madoff, the notorious fraudster who ran the largest Ponzi scheme in history.
Still, many people in the family’s social circle view the situation through a sympathetic lens, according to interviews with more than a dozen friends and colleagues. They insist that Mr. Bankman and Ms. Fried couldn’t have known about any wrongdoing at FTX, while acknowledging that Mr. Bankman may have been naïve in his embrace of crypto.
“It’s like a Greek tragedy,” said John Donohue, a colleague who has attended Sunday dinners at the Bankman-Fried home. “The story of flying too close to the sun, and having your wings singed.”
The idea that “Mr. Bankman and Ms. Fried couldn’t have known about any wrongdoing at FTX” is an absurd thing to print. If it was attributed as a direct quote like the line preceding it, fine. But presenting that as the consensus of people in the know is disturbing, even if the people they interviewed honestly thought that. The problem is, we can’t know what people truly think, and definitely not friends of the Bankman-Fried’s who do not want to see them get into any more trouble.
I can’t help but harp on O’Leary’s quote about feeling safe at FTX because SBF’s parents are renowned compliance lawyers at Stanford University. Not only that, but his father was actually on the payroll, as the New York Times detailed, “Mr. Bankman was deeply involved in FTX. In its early days, he helped the company recruit its first lawyers.”
“From the start whenever I was useful, I’d lend a hand,” Mr. Bankman said on an FTX podcast in August.
Mr. Bankman visited the FTX offices in the Bahamas as often as once a month, a person who saw him there said. Among the much-younger staff, he cultivated an avuncular persona, regaling employees with stories from his son’s youth, the person said. He and Ms. Fried stayed in a $16.4 million house in Old Fort Bay, a gated community in Nassau, the capital of the Bahamas; the couple’s names appear on real estate documents, according to Reuters, though Mr. Bankman-Fried has said the house was “intended to be the company’s property.”
The parents did not simply bring legitimacy to their son’s operation by blessing him with their last names or by having him grow up in the Silicon Valley area — they actively backed and worked with him… And collected tons of money and benefits from him. Obviously, the Bankman-Fried family was not poor before SBF became a billionaire, but the wealth increase was obviously dramatic. How does the entire family not take a moment to question what’s going on?
That is the story that is being spun — one of a family that just wanted to apply effective altruism to help people less fortunate than them. They knew best what to do with the money. They have strong morals, expertise, and connections. Who cares if it was customer funds?
From the well-documented stories of SBF himself spending tens of millions of dollars on political donations to his brother’s, Gabe Bankman-Fried, nonprofit organization, “Guarding Against Pandemics,” and his mother’s “Mind the Gap” super PAC that is said to have applied “money ball-style” donations to mostly Democratic causes and politicians, who knows how much SBF spent? Who knows if it was him propping up these endeavors? Almost assuredly he was — that’s why there’s radio silence from the organizations themselves.
Alameda Research donated more than $12 million to Guarding Against Pandemics according to California state campaign finance records. Now, they have scrubbed any mention of the Bankman-Fried family from their site. Sure, guarding against the next COVID is a good thing, but with all the money in the world, I don’t think they should be intent on keeping money donated directly from a now criminally-charged hedge fund (this appears to be the case, based on the disassociation with the Bankman-Frieds rather than a pledge to investigate and donate back any stolen funds). And this is just the tip of the iceberg when it comes to the donations doled out, in some cases secretly, by the Bankman-Fried family. Just all very strange stuff.
Even his father, who seemed to be more intent on donating to the less fortunate rather than political issues… The question that I keep wrestling with is, did they ever stop to think… “Where did all this money come from? Yeah, it’s great our son is wealthy and successful but how did this happen so quickly and so grossly gigantically in terms of capital?”
Maybe they actually never did stop to ask that. I don’t know if there’s a crime here involving them. Even if there is, I highly doubt they get charged. On simply a moral level though, for all the lip service about altruism, I wonder if the family has reckoned at all with the fact that they almost undoubtably used mostly customer funds to jumpstart their own causes. Probably not, considering how they’re in the New York Times looking for sympathy about how they’re going to spend their life savings on their son’s defense.
With the news last night of former Alameda CEO, Caroline Ellison, and FTX cofounder Gary Wang pleading guilty to multiple fraud charges, it would be behoove others who took this stolen money to stand pat. Dumping the money to charity before the investigation and trials are complete is amoral, no matter how it’s spun. Many of the people involved in the first place didn’t seem to have much of a moral compass anyways — the story of “Progressive Boy King” and suspected straw donor, Sean McElwee, is another good example of that lacking.
There is something particularly distasteful about claiming to be an “effective altruist” and not taking a moment to think about all the people you may leave shattered financially. I hope to see a story approach the family’s political and charitable spending from that angle — and what they actually knew when spending vast sums of likely stolen funds.