Sam Bankman-Fried’s parents loom large over FTX’s fall—and their son’s trial

Heading to college at the Massachusetts Institute of Technology, Sam Bankman-Fried had a single career path on his mind. “I thought, Maybe I’ll be a professor or something, ’cause it’s what people do,” he told a colleague in 2020. That was, after all, the main career track he’d seen as he’d grown up on and around the Stanford University campus, where his parents were well-respected law professors—his father, Joseph Bankman, with a focus on tax law; his mother, Barbara Fried, on economics, philosophy, and morality.

Of course, Bankman-Fried didn’t become a professor; instead, he went into cryptocurrency, starting the hedge fund Alameda Research and the crypto exchange FTX, which were hugely successful—until their November implosion and subsequent bankruptcy. Federal prosecutors have charged Bankman-Fried with six counts of fraud and one of money laundering, and he is scheduled to go on trial October 3 in Manhattan (you can follow along with our daily coverage from inside the courtroom here).

The government says he ran a multibillion-dollar scheme that made him rich at the expense of customers, lenders, and investors. John J. Ray III, the new head of FTX—who is overseeing it in bankruptcy and attempting to trace assets—said in a February bankruptcy hearing that trying to untangle FTX under Bankman-Fried’s reign was “pure hell.”

Questions have begun to pile up about Bankman-Fried’s parents—who were recently sued by the people in charge of trying to get FTX’s missing money back—particularly around their emphasis on ethics: How involved were they in their son’s businesses? Did they reap any benefit from them? And how could a kid reared in an intellectual household that regularly discussed morality and money end up accused of federal fraud?

In his final hours running FTX in November, Bankman-Fried was sending e-mails to various officials, according to bankruptcy court filings. “Cc’ing Joe,” he wrote in one, with his father copied, “who can give more details.” In another, also with his father copied, he wrote, “Myself and Joe (cc’d) will be responsive going forward.”

As lawyers negotiated Bankman-Fried’s exit from FTX, Bankman was in the Bahamas, where FTX was headquartered, appearing on video calls with his son, according to bankruptcy court filings. And in January, after Bankman-Fried’s arrest, the founder sent a document he’d created to a consultant, cc’ing his father, according to filings from prosecutors in Bankman-Fried’s criminal case. The document’s title: “Where did the money go.”

Prosecutors said that Bankman-Fried’s legal team suggested to them in an August letter to the court that Bankman-Fried may have relied on his parents’ legal advice. After that, prosecutors searched Bankman-Fried’s own documents—including Google docs—to see how frequently his parents’ names came up. Their finding: 13,000 pages of material.

Lawyers representing the FTX debtors in bankruptcy wrote in a September civil lawsuit against Bankman and Fried that the couple “exploited their access and influence” within FTX and claimed they were fraudulently routed millions of dollars in the process, as well as set up in an ocean-view Bahamas house that Fried furnished with rugs and vases she told FTX employees to order.

“This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins,” Sean Hecker, a lawyer for Bankman, and Michael Tremonte, a lawyer for Fried, said in a statement. “These claims are completely false. Mr. Ray and his massive team of lawyers, who are collectively running up countless millions of dollars in fees while returning relatively little to FTX clients, know better.”

Fried, the daughter of a feminist music scholar mother, had studied English at Harvard University, and while a student at Harvard Law, coedited an influential book on women and biology. Four years out of law school, as an associate at Paul Weiss, a large New York-based firm, she was hired by Stanford Law School. She specializes in the intersection of law, philosophy, and economics, and her published works have esoteric titles like “Ex Ante/Ex Post” and “The Limits of a Nonconsequentialist Approach to Torts.”

Bankman is more from the typical rumpled-professor world: chalk on his pants, coughs a lot, uses informal phrases like “pissed off” and “such a drag” in interviews. His work was more practical than his domestic partner’s: suggesting a simplified way for people to file taxes. He also got a psychology degree and worked as a therapist. 

Although his parents were well off for academics, Bankman-Fried didn’t grow up in a hugely rich household. His father has described in interviews how he and his wife delayed a $30,000 kitchen renovation so he could afford a lobbyist for his tax proposal. On the Stanford University campus, Bankman and Fried were considered successes.

But at the same time both were teaching, Stanford and Silicon Valley were taking off as centers of entrepreneurship-based wealth. Bankman’s law students included Peter Thiel, now a billionaire entrepreneur, and Orlando Bravo, a private-equity titan—and their focus wasn’t on Bankman’s tax courses. “They might not be the most interested in learning your subject,” Bankman said of students like Thiel and Bravo. “They might, for example, kind of blow off my class, frankly.”

It’s hard to say what Bankman-Fried took away from watching Silicon Valley explode and his father’s former students launching businesses to get their piece of it, but by the time he was a teenager, he had a clear moral viewpoint. His parents hosted famous parties/salons at their home, where attendees were expected to argue out ideas in an intellectually rigorous way, especially about the moral theory that interested both of them. In a 2020 book, Fried wrote that Bankman and her sons (Sam and his younger brother, Gabe) subscribed to the utilitarian school of thought; she is considered by peers to be a consequentialist.

Put very simply, utilitarianism suggests that the way to measure moral rightness is to examine what causes the best outcome for the largest number of people. Consequentialism also evaluates morality in terms of outcome, but a “good” outcome is more up for debate—it’s not solely an increase in happiness for the broadest set of people, but could be molded toward, say, animals, or a small group of people, or to a “good” consequence other than happiness. While these may seem like basically the same thing to a nonphilosopher trying to understand the theories via Google search, they are different the way a parent who’s a Democrat and a child who’s a progressive are: They agree in a broad sense, but on specifics and at the extremes there’s quite a bit to argue about.

“When Sam was about 14, he emerged from his bedroom one evening and said to me, seemingly out of the blue, ‘What kind of person dismisses an argument they disagree with by labeling it the Repugnant Conclusion?’” Fried wrote in her book.

“In the years since,” she continued, “both Sam and Gabe have become take-no-prisoners utilitarians, joining their father in that hardy band. I am not (yet?) a card-carrying member myself, but in countless discussions around the kitchen table . . . they have shown me by example the nobility of the ethical principle at the heart of utilitarianism.” The epigraph was notable not just for her recollection of what her eldest son said but that Fried wanted it memorialized in her book for the world to recognize.

Bankman-Fried’s interest in utilitarianism continued at MIT. He spent time on a “rabbit hole” of utilitarian blogs, he said in a 2020 FTX podcast, and he joined Epsilon Theta, a group with an intellectual bent where people of all genders lived together in an off-campus house, and members were interested in things like chess, veganism, and gaming. (Gary Wang, the cofounder of Bankman-Fried’s hedge fund, Alameda Research, was also a member.)

Bankman-Fried quickly quashed his idea of becoming a professor: He didn’t like academic research, nor was he particularly excited about his major, physics. More importantly, during his sophomore year he learned about a moral framework called effective altruism.

A founder of the movement, William MacAskill, a young philosopher now teaching at Oxford, reached out to him. “I don’t know how they knew to email me—I suspect it was from an online forum” [about utilitarianism], Bankman-Fried said in a podcast interview, noting that MacAskill encouraged him to attend his nearby lecture. Doing so, Bankman-Fried said, led him “for sort of the first time” in his life to have “real discussions” about “the best” thing to do with a career: to “try and make and give away money; anything else has to sort of beat that.”

Make more money to do more good, essentially. After college, he worked at a quantitative trading firm called Jane Street. It was effective altruism that pushed him to start Alameda. “[If] I should be trying to maximize expected values, that probably implies substantially riskier strategies,” he said on the podcast.

It sounds noble, and the idea of effective altruism caught fire around Silicon Valley. Here was a way to quantify what sort of philanthropic giving was most effective, and to invest in long-term results. But philosophers saw holes in it. “It might mean you should divert resources to vast numbers of future people, at the expense of current people,” alongside many other well-known issues, says Aaron James, chair of the philosophy department at the University of California, Irvine. Earlier in his career, during a stint at Stanford, James says he often had cordial arguments with professor Fried, who he respects, about philosophy, morals, and economics.

Thinking about Fried’s work, though, James says, one could understand why her eldest son would embrace effective altruism. “That’s the allure to SBF—this isn’t just your mother’s and father’s consequentialism, this is the upgraded version using decision theory, analytical tools,” he says. “There are people like SBF who are attracted to it because they didn’t have to go into academia. They could go do this other thing but it still had the respectability of being an academic, smart guy. If you look like you’re up on your Bayesian decision theory . . . now a lot of Silicon Valley bros are like, ‘Wow, this guy knows what he’s doing.’ Never mind that it’s all bullshit.”

That meant Bankman-Fried could not only do his parents proud but also do them one better, and out in the real world: He could focus on making astounding amounts of money, with a gloss of moral legitimacy. It’s as though Willy Wonka’s parents had toiled in a university chem lab for decades, publishing obscure papers on the optimal alkaloid content in chocolate, and then their son opened the grandest chocolate shop of all time and handed out golden tickets to deserving recipients. What more could a parent—or child—want?

FTX quickly became a gigantic success story, valued at $32 billion in January of last year. Bankman-Fried relocated himself and his companies to the Bahamas after that nation passed crypto-friendly legislation. Court records show FTX spent massive amounts on island businesses, things like hotels ($15.4 million in a period of less than two years), catering, and real estate. It also started a charitable division.

FTX’s and Bankman-Fried’s charitable efforts, according to court papers, included a $300,000 grant to an author to “figure out what humans’ utility function is,” and $35 million to a pandemic-preparedness group run by Sam’s younger brother, Gabe, “the majority of which originated from Alameda accounts containing commingled customer and non-customer funds,” prosecutors wrote. Gabe and an FTX philanthropic executive also discussed, in a memo revealed in court documents for the FTX bankruptcy case, buying the island nation of Nauru, where they could build a “bunker/shelter” in case of “some event where 50%-99.99% of people die [to] ensure that most EAs [effective altruists] survive.” The memo noted: “Probably there are other things it’s useful to do with a sovereign country, too.”

Bankman’s and Fried’s involvement with their son’s companies remains muddled. Early in FTX’s development, in 2020, Bankman-Fried told the FTX podcast that he didn’t talk to his parents much. “Every week, and sometimes more than that,” he said.

Yet from early on, Joe Bankman said he was involved. “From the start, whenever I was useful, I’d lend a hand, and it was clear at the start that on things like law, I mean the company didn’t have any lawyers, so I think my utility there was pretty obvious,” Bankman told the FTX podcast earlier this year. Bankman made introductions: A lawyer who ended up joining FTX wrote in a January bankruptcy court filing that he met Bankman-Fried through Joe Bankman; Bankman himself noted he’d “interviewed lots of firms for my son’s company and chose” one, and added, “I had a lot riding on that decision,” as quoted in the September civil lawsuit; and Bankman accompanied his son as he made the rounds.

In December 2021, Bankman-Fried was to testify before Congress, and had an appointment to meet with Bill Huizenga, a Michigan representative. “He was at least 15 minutes late, and his father accompanied him,” Huizenga said at a December 2022 Congressional hearing.

Bankman had an official, paid position at FTX by December 2021, advising its philanthropy operation, the September lawsuit against the parents from the FTX debtors alleged. Bankman told the FTX podcast he was focusing on projects like giving unbanked people access to crypto wallets in lieu of bank accounts. He questioned his salary, however: Bankman wrote an FTX administrator in January 2022 that he was “supposed to be getting $1M/yr” but wasn’t. He then alerted his son that his salary was lower than expected: “Gee, Sam I don’t know what to say here. This is the first [I] have heard of the 200K a year salary! Putting Barbara on this.”

The same month, Alameda routed $10 million to an FTX account of Bankman-Fried’s; within a minute, the same amount was transferred to an FTX account of Bankman’s, FTX’s bankruptcy lawyers said in a July filing.

“We are so touched by this gift. Mom is announcing retirement, which she would not have done otherwise,” Bankman wrote to his son, an email included in the September civil lawsuit the FTX debtors filed against Bankman and Fried. Lawyers working on the FTX bankruptcy wrote in a court filing that they believed “Bankman-Fried’s father has been using this ‘gift’ to finance Bankman-Fried’s criminal defense.” Bankman and Fried’s spokesperson did not respond to a request for comment about the purported $10 million transfer.

Moreover, FTX entities bought Bankman and Fried a $16.4 million ocean-view residence in Old Fort Bay, the Bahamas, the FTX debtors alleged in the September civil lawsuit, and paid for the duo to become permanent residents of the country, which they did last year, the September lawsuit alleged. Fried wrote in April 2022 that she was “happy to host this at our house at Old Fort Bay,” and in May Bankman e-mailed: “We are hoping you can all come to celebrate the house you helped us buy/move into,” inviting recipients to the Old Fort Bay house.

Bankman, the lawsuit says, asked if he could have FTX billed directly for their landscaping there, and Fried told FTX employees to place online orders for furnishings, including a sofa, eight vases, and five rugs. Lawyers said they did not find any record of either parent reimbursing FTX for the properties. A spokesperson for Bankman and Fried tells Fast Company, “The house was used as temporary housing while Joe worked in the Bahamas. Outside counsel confirmed to Joe and Barbara that FTX would have all beneficial ownership of the house and agreed to document that in writing.”

FTX’s quick and far-reaching downfall came in November. A crypto publication ran a story about Alameda’s balance sheet, investors panicked that their FTX holdings weren’t worth what they thought they were and demanded withdrawals; FTX couldn’t cover the demand, and froze the exchange—then declared bankruptcy.

Bankman-Fried’s trial is scheduled to begin next week in Manhattan, where he faces seven counts—six of fraud and one of money laundering. (Other counts, related to political contributions, are scheduled to be tried separately in March.) Bankman-Fried pleaded not guilty, and initially was allowed to live at his parents’ home in Palo Alto, California, guaranteed by a $250 million bond. But prosecutors complained about his behavior, and in August, Judge Lewis A. Kaplan, who is overseeing the criminal trial, revoked Bankman-Fried’s bail and ordered him jailed.

Bankman and Fried continue to stand by their son, regularly attending his court hearings. In the September civil suit filed against Bankman-Fried’s parents, lawyers excerpted e-mails between Barbara Fried and her son over political and philanthropic contributions. Bankman-Fried agreed to structure a $15 million donation as his mother had suggested: It was effective altruism at work, perfect harmony between the parents’ life work and the child’s business. “Awesome! Yup happy” to do it, Bankman-Fried wrote in an August e-mail.

His mother replied: “[Y]ou are a prince.”