Sam BankmanFrieds Parents Used Their House To Bail Him Out. But They Rent The Land From Stanford

Sam Bankman-Fried's parents' home on the 700 block of Cooksey Lane in Stanford, California (Google Maps).

Just before Christmas, FTX founder Samuel Banman-Fried, who faced federal wire fraud and money laundering charges, was released on $250 million bail posted on his parents' Palo Alto home.

The size of the bailout — 25 times that of Bernie Madoff — drew a lot of attention. Prosecutors called it "the largest pretrial bail in history." What doesn't catch on is that Joseph Bankman and Barbara Fried, both professors at Stanford Law School, are not typical homeowners. Their property is a faculty building on the same Stanford campus. Stanford owns the land and Bankman and Fred lease it.

While the couple told the court the 3,000-square-foot, five-bedroom home was worth $3.55 million, home ownership restrictions on the Stanford estate make it difficult to determine market value in the usual way. If Banman and Fred sell their house — or if the government buys the block and then is forced to sell — the pool of potential buyers will be limited to other qualified Stanford faculty. Regardless of the situation, the sale must go through Stanford.

This dramatic situation highlights the widespread bias in the bail process for wealthy white defendants, in contrast to the merciless conditions faced by poor people of color awaiting trial.

"Plaintiffs treat white-collar cases differently than other cases," says Alison Sigler, a professor at Chicago Law School. "There is no justice in all this."

While it is unusual to use Stanford faculty to provide collateral, such an arrangement is perfectly legal. Likewise, it is not unusual for the collateral to be worth much more than the value of the assets used to secure the property. The $250 million figure attributed to the Bankman-Fried bond is largely arbitrary, experts say.

"The goal is for parents to do everything they can to put themselves on the line," said Daniel Richman, a professor at Columbia Law School. Posting bail at the family home is Bankman-Fried's way of enlisting the support of those close to him, said Richman, a former U.S. attorney. "It's symbolic that they're taking their most valuable assets and keeping them."

More than 800 faculty members work on the Stanford University campus. It can only be purchased by Stanford University faculty.

University publications describe faculty housing as follows: Stanford faculty can "buy a share in the lease." Buyers sign a "land lease" with the university, and faculty pay Stanford rent and are responsible for all property taxes.

The location is so complex and ambiguous that a Santa Clara County resident has an entire page dedicated to Stanford faculty dorms.

This unique structure dates back to the founding of Leland and Jane Stanford University.

"The foundation's grant stipulates that campus land cannot be sold, so people who buy a home on campus can only rent the land underneath it," Stanford Magazine explained. In the year According to a 2005 article, author David Levitt, who grew up in the same house as Bankman Fried, wrote a novel inspired by an "old case" of campus teachers.

"Stanford's intent was to ensure that land donated to the university would last in perpetuity," explains the Stanford Faculty Housing Handbook.

The pamphlet states that the purpose of on-campus housing is to "establish an academic community in residence."

As with many universities, faculty housing plays an important role in recruiting at Stanford. Future teachers plan to move to Palo Alto, where the median home price is $3.5 million, according to Zillow. Current Stanford faculty homes for sale include a four-bedroom, three-bathroom home for $1,962,500 and a two-bedroom, two-bathroom home for $870,000.

"Without these arrangements, no one in Palo Alto would be able to afford a home," said Richman, a professor at Columbia University. "Stanford will give them a job opportunity to attract them."

Bankman and Fred In 1991, he signed a 51-year contract with Stanford. Bankman and Fred told the school to use the house as collateral, a source familiar with the sponsorship deal said.

A Stanford spokeswoman said permission from the university is not required to use bail.

"Under the land lease agreement with the university, Joseph Bankman and Barbara Freed have the right to use their share of the lease as collateral. None of these conditions require university approval," De Mostoffi said in a statement. The contract did not authorize Joseph Banman and Barbara Freed to use the rent as security for the mortgage unless otherwise required. No."

Stanford did not respond to a request for a copy of the lease.

A spokeswoman for Bankman-Fried declined to comment.

Under federal law, defendants are presumed innocent, and pretrial release is common. In practice, most of them do not return to their families. In the year In 2019, 75% of federal defendants were in pretrial detention, according to federal court data.

A recent report led by Sigler, a professor at the University of Chicago, found that judges illegally incarcerate the poor and impose excessive financial conditions, and that people of color can illegally incarcerate people for financial reasons. You can't buy a sheriff.

Sam Bankman Freed pleaded not guilty in New York federal court to fraud and money laundering charges on January 3 in New York. (Anadolu Agency)

In the year Under the federal Bail Reform Act of 1984, pretrial detention is separate from pretrial detention and must be used only to ensure public safety and for defendants to appear in court. But in recent decades, the number of pretrial detainees has increased dramatically.

In her research, Ziegler cites what she calls a "culture of detention" in which prosecutors request pretrial detention and judges unquestioningly enforce it.

But at the Pinkman-free bail hearing, Sigler said, prosecutors took a different stance. The government said it agreed to extradite Banman-Fried from the Bahamas, saying he had "family and community ties" and that the risk to the community was not a concern.

"It's crazy to read this article, because the government's arguments are often defense arguments," Ziegler said. “The prosecutor's office is asking the judge to release this man in court. They often say the opposite.”

From the transcript, Ziegler indicated that Bankuman Fried's attorneys were negotiating with the government to extradite him on bail pending trial.

In addition to the family home, Bankuman-Fried's bail package includes cash: Two men, whose names have been changed, paid $500,000 and $200,000 to be released from prison.

While Bankman-Fried has a legal team that handles high-profile bail negotiations, by comparison, more than 90% of federal defendants do not have access to a lawyer, according to a 2017 court report. He participated in the first court hearing on behalf of the public, on the basis of "lack of consent".

The Bankuman-Fried trial will begin in October. Meanwhile, bail conditions include surrendering a passport, wearing electronic devices and staying with parents. Away from federal custody, he will be held in a more than 3,000-square-foot, five-bedroom, three-bathroom facility on nearly an acre with a pool and hot tub, records show.

Banker Fried's bail terms are similar to those of financier Madoff, who pleaded guilty to fraud and other crimes and was sentenced to 150 years in prison for running a $50 billion Ponzi scheme. Madoff was released on bail and under a nightly curfew, but was free to travel throughout Connecticut, southern New York and Long Island during the day, the New York Times reported. Madoff secured his release by using the houses in his wife's name.

If Bankman Fried runs away, the government can take over his parents' house. "They don't accept ownership of the house, but the land," said Richman, a professor at Columbia University. Richman said the government should work with Stanford to sell the home to a buyer who meets Stanford's eligibility criteria.

On January 4th, Bankman and Fred claimed in court that they had a $3.55 million equity in their home and guaranteed that they would pay that amount in person if their son did not default on the mortgage.

More than 100,000 people are currently in federal prisons awaiting trial. According to the Department of Justice, 99% of those charged with federal crimes are acquitted, and 98% do not commit crimes.

"It's very rare that someone doesn't meet these conditions when they're released and have the opportunity to return to their families," Ziegler said.

Bankman Fried, according to the plaintiffs, "embezzled millions of dollars."

"If we're happy that someone charged with a crime of this magnitude has been acquitted, that really makes us question why we're holding so many people awaiting trial for more serious crimes," Ziegler said.

Times contributor Adam Muharraq contributed to this report.

This story originally appeared in the Los Angeles Times.