As Sam Bankman-Fried, the founder of the now-defunct cryptocurrency exchange FTX, awaits his March 2024 sentencing, reports have revealed the financing behind his legal defense may be linked to the funds from his crypto hedge fund, Alameda Research.
FTX, once a cryptocurrency juggernaut, faced a dramatic collapse in November last year. Bankman-Fried, often abbreviated as SBF in the crypto community, has stated that his personal bank account held approximately $100,000. He has denied any wrongdoing, claiming he has not misappropriated funds.
Despite the apparent lack of personal funds and the failure of an insurer to cover the defense costs under a directors and officers (D&O) insurance policy, SBF has managed to secure a prominent legal team. The funding of this defense, which could cost millions, has been a point of contention and speculation.
A March Forbes report revealed that Allan Joseph Bankman, SBF’s father, is covering the hefty legal fees. He is utilizing a substantial gift from his son, an amount reportedly in the vicinity of $10 million, given in 2021. This transfer, according to sources close to SBF, was made under the lifetime estate and gift tax exemption, theoretically allowing for a tax-free gift. However, the funds are believed to have originated from Alameda Research, where they were supposed to be utilized for trading or safeguarded on the FTX platform.
In September, FTX initiated legal proceedings against Bankman and his wife, Barbara Fried, alleging they exploited their FTX connections for personal gain. The bankruptcy filing accused the couple of enriching themselves at the expense of FTX’s creditors, an accusation made more potent given Bankman’s three-decade tenure at Stanford Law School and his reputation for advocating tax codes supportive of lower-income individuals.
As the court date approaches, the scrutiny of the origins of SBF’s defense funds remains a focal point, potentially intertwining his family in the broader legal maelstrom surrounding FTX’s dramatic downfall.