Bankman-Fried's Shrinking ‘$250M Bond’
coindesk.com
coindesk.com
> Instead, Bankman-Fried’s parents promised to pledge their Palo Alto, California, home as collateral. The Palo Alto home is rumored to be worth $4 million. And that is the full extent of the collateral pledged to guarantee the $250 million bond. No other collateral was posted or promised.
The first couple sentences are true: his parents have agreed to convey title to their ~$4M Palo Alto house to the court as partial guarantee of the $250M bond. But I think the last sentence is contradicted by the actual bond agreement:
"2 non-parent sureties to sign bonds in lesser amounts to be agreed to"
This is in all-caps at the middle of page 5 of https://storage.courtlistener.com/recap/gov.uscourts.nysd.59.... Which is to say, at least according to the published agreement, it is not true that "no other collateral was posted or agreed to".
> Yes, you read that right. Bankman-Fried walked out of court a free man by signing a piece of paper where he promised to pay the court $250 million if he decides to flee to another country with no extradition.
It is true that this is all that Sam did, but it intentionally fails to mention that 3 (or perhaps four?) additional people have also signed up for the same agreement to be responsible for the gigantic (potentially non-collectible?) amount should Sam disappear. Presumably the hope is that they are able to apply social pressure to keep him from disappearing.
Given that much of the failure of FTX related to overvaluing of collateral, the irony is definitely strong. But I think we should still try to be accurate when pointing out the apparent absurdities. Further corrections of course appreciated if I'm wrong about these corrections.
Edit: dragonwriter points out below that the "2 non-parent sureties" are likely just additional signed surety bonds, and thus the article is probably correct the "no other collateral was posted or agreed to".
He’s a fraudster who was content evading justice in the Bahamas for years to come. Of course there is popular desire for retribution, even beyond that which exists and continues to build against crypto at large.
I don’t believe in his guilt beyond even reasonable suspicion. I do think he is a flight risk. He is delusional enough to attempt it, and may have the hidden means by which to make it.
That it’s not a jail. Jails are tougher to get out of than ankle bracelets.
His parents are going to spend the rest of their lives fighting civil lawsuits, if not criminal cases of their own. Losing their home is a matter of time. It is difficult to even say to what degree their plight matters to him.
The love of a parent for their son. That's a benefit of doubt I'd need to see extraordinary evidence of sociopathy to discard.
I'm totally game for working for a more equitable society where everyone gets to live in dignity even if they put their money into bad crypto exchanges though. Let's definitely do that, regardless of what happens in this case.
This is my honest read of the situation, you're welcome to disagree. I have no agenda, only an opinion.
We deny bail to serial killers to avoid putting lives at risk, not because they're extra guilty. There's no indication SBF is a danger to anyone around him, and the conditions of his bail include counseling in case he's a danger to himself. Maybe he does have a house in Argentina with a stack of unmarked bills, who knows, but that is that the bond and the ankle monitor are for.
Seems to me that he made chart go up for no reason and everyone was perfectly happy with that, and when chart went down for the same reasons (i.e. fraud/no legitimate reason) then everyone is upset about it.
If people are upset about lesser offenses getting handled more aggressively, they should spend some time lobbying for lesser offenses to get handled less aggressively.
This is an absolute guess because I don't know, but I think a lot of it was average joe crypto-curious investors having their money stolen and then given to the smart financial firms who were on the winning side of his secret bad bets. There may also have been some pension fund involvement because they seem to be caught up in this stuff on a regular basis. (Because of the way bonuses work, managers can skim off the top by investing in known Ponzi schemes and taking the credit for the 20% returns. They know they're not going to have to pay those bonuses back when they're inevitably "surprised." This happened with Madoff and was a big contributor to his success.)
Then SBF allegedly moved those assets over to Alameda for risky trades, and also pulled some out to buy fancy houses.
The "billions destroyed" seems more likely to refer to the general "destruction" of nominal wealth which, I posit, wasn't real to begin with.
Also is it $10B in stolen deposits?! I seem to be coming across a $1-2B figure but admittedly haven't been following super closely.
Funds misappropriated by Alameda and spent on VC investments may ultimately have become people's salaries. Some politicians have announced their intention to donate an amount of money equal to SBF's contributions of customer funds, but it's unclear whether they mean "donate to my own 501(c)(3)" or "return to FTX to be paid to creditors" and the phrasing certainly sounds more like the former. Most of the funds were probably embezzled (you will hear these people say "loaned" I guess) by FTX/Alameda executives or lost as part of Alameda's trading operations. Recovery of trading losses is extremely unlikely, especially trading losses that occurred long before the bankruptcy on venues other than FTX. SBF and BlockFi are currently arguing that each of them should receive the $441 million of Robinhood shares that SBF purchased using customer funds. "Hackers" stole about $500 million of customer funds from FTX US and FTX Intl immediately following the bankruptcy, and these funds have (mostly?) made their way into RenBTC and been bridged to native BTC and sent to mixers.
Some FTX customers who withdrew funds as part of their normal operations will face clawbacks, and some other FTX customers such as Modulo Capital and @AlgodTrading who have essentially stolen from all other creditors will hopefully also face clawbacks, but the total amount recoverable this way is maybe $1-4 bn, and all of these people are creditors anyway, so giving the money to other creditors doesn't do anything to address the shortfall.
It is, in fact, a $250M bail bond, people just have a very wrong mental model, based on a bad generalization from an already slightly wrong mental model of the terms when an arms-length bail agent provides surety to the court for the defendant, of what that means.
Are you familiar with the "please don't sneer" guideline?
I'd propose our discourse would be hobbled if we couldn't make comments like, "many people in this discussion have misconception X". But perhaps "very wrong mental model" was too many superlatives and "misunderstanding" would've been sufficient.
The guy stole billions from average people AND big time investors (he pissed on both buckets), he then proceeded to make such dumb mistakes that make him seem like it has a borderline mental issue, he also happens to be an absolute zero for charisma. How do you expect someone to sympathize with him, honestly?
What would you like to happen then?
This really seems to me like a Thursday in the criminal justice system, with every single step being scrutinized and cast into the worst possible light.
https://www.yahoo.com/entertainment/judge-sbf-case-recuses-h...
Do any of them deserve it?
He's not, and the perception that he is comes from a misunderstanding of the systems involved, which is why the descriptions of how this is supposedly special treatment or surprising tend to include as the foundation multiple layers of wrong assumptions about how bail works in general.
He "stinks of corruption" in part because he's Jewish? How am I meant to interpret this as anything other than bigotry?
>2 non-parent sureties to sign bonds in lesser amounts to be agreed to
I'll be extremely generous and interpret that as two bonds worth 3.99...M each or the absolute max. value that is less than the 4M house.
Would you extend a 250M credit to someone who offers you 11.8M in illiquid assets? Also, they happen to be the parents of one of the biggest fraudsters in recent years ...
Come on, this is ridiculous.
Evidence seems to be building that, if they weren’t complicit, they at least benefited from his fraud.
He discovered the Haber process around 1911, which was well before WWII and it was intended for fertilizer only. Eventually people realized that mass ammonia production was very helpful for chemical warfare, and many (including French nobel winners like Grignard) engaged in it.
The Zyklon B synthesis is a red herring.
The Court is not extending $250M of credit based on the collateral of the house.
The Court is assessing that the combination of the $250M penalty, the security given in the form of the claim on the house, the particular full sureties on the hook, the additional partial sureties on the hook for a lesser amount, and the nonfinancial conditions of bail are sufficient to adequately guarantee SBFs appearance (in part, based on the prosecution also accepting that.)
Or for that matter, if they had said that the penalty was $0, and that the securities and sureties were sufficient?
Presumably, they'll never find out, so perhaps it's moot. But I feel like there's a legal distinction or rule I'm missing.
I would not assume they know that, or that that is true.
In fact, I think there is plenty of reason to think that:
(1) SBF has control of assets exceeding $250M (not untainted, and they would likely be subject to criminal forfeiture if he was convicted and they were identified, but in the case of flight...), and
(2) He would not necessarily be successful keeping them out of the reach of a default judgement in favor of the US government if he fled justice
> Or for that matter, if they had said that the penalty was $0, and that the securities and sureties were sufficient?
Security and sureties apply to the penalty, and are meaningless if it is zero.
What argument do you think I'm making? The argument I'm trying to make is that an article serving as an explainer of a complex legal topic should be factually correct, even if it complicates the desired narrative. Do you disagree with this?
> Would you extend a 250M credit to someone who offers you 11.8M in illiquid assets?
As to the bigger question of whether this bail arrangement is reasonable, I don't think we have enough information yet. $250M is an arbitrary large number, and I don't think a percentage is important. The real question is whether whatever agreement has been made is sufficient to pressure Sam into showing up for the trial. Personally, I'm worried that he may still have control of sufficient funds that he can afford to flee and repay in excess whoever takes the loss. But depending on who the unnamed unrelated party (or parties?) are, and what other assets are available for collection, maybe this worry is unfounded. I think we should call attention to the possible impropriety of the arrangement, apply pressure to find out the missing details, but reserve judgement until we know more.
It’s weird that you’re pointing out an irrelevant technical detail which misses the point of the opinion piece. The point is that SBF was able to walk out of jail without paying anything and the author finds this absurd.
Sounds like something SBF would find reasonable.
Phrased another way, we're about to find out if SBF is morally bankrupt enough to take away a huge portion of his parents assets as well.
huge portion being +/-10x their net worth and a debt that can not be discharged through bankrupcy.
If he has hundreds of millions hidden away, he could easily ensure that his parents get some of it later to compensate them.
That said, I don't think he will run. His parents are both Stanford law professors and he has an insane number of connectionsand people that owe him favors. I think he will go to court and put up a very strong defense and end up with around ten years in jail at the end of it all.
Never said it was and the whole point of this is not whether they put some collateral or not.
The whole point is, how come a 250M bail can be secured with a 4M house? That is the whole thing that is driving everyone nuts.
Divide by a thousand and you may be able to get a better graps of it. Imagine you have a bail set for 250k and you tell the judge, well I have this really shitty used car which (may be) worth 4k, you can keep it, but also you can't take it from me now because well, it's my car :). You would stay in jail.
It doesn't really look any different than normal bail. Maybe this is many people's first exposure to the concept of bail though. Bail is also not just a dollar amount, it's about convincing the judge you've put forward enough to motivate you to stay.
This is wrong, a signed surety bond is not collateral, its a binding commitment to liability. Security/collateral for that liability is a separate thing, abd the only security provided is the house.
OTOH, federal law allows fully unsecured, personal bond of the accused if the jidge thinks it is sufficient, so having any security or surety (where this agreement has both) is optional, so really this just seems to be a bunch of people who don’t know how federal bail works being shocked not by something out of norms, but because their understanding of the norms is inaccurate.
And judge, don’t forget, Mr. SBF voluntarily waived extradition.
But that's not what courts are trying to do with bail, so when you have a bond that isn't from a bail agent, the model that is tolerably-incorrect in the bail agent case becomes wildly inapplicable.
It becomes an IOU if he skips on his court appearance, no? That is, the potential penalty here is an IOU. (You have even described it as a "promise to pay" earlier: https://news.ycombinator.com/item?id=34100971 ) Yes, if he shows up to court, no one pays $250M and everything is great. We are talking about the penalty if he skips. No one has deposited $250M with the courts to be returned when SBF shows up for trial. If he does skips on his court appearance, I find it difficult to believe that anyone will successfully recover anything like $250M from SBF and parents. Which begs the question of what the point of a $250M figure is.
The rest of your comment is just not responsive to my comment? You have replied to several of my comments talking about people in the abstract having "misconceptions" around bail agents, and these responses are wholly unrelated to my remarks, which do not mention bail agents at all and are not about bail agents. So I would appreciate it if you would respond with more specific arguments and leave out the fluff.
Almost like there is a reason this is partially secured, not personal (there are additional sureties), and comes with extensive non-financial conditions.
Thanks for the detail. I wasn't sure if the "bonds in lesser amounts" were clearly just signed promises to pay, or might also include additional property bonds. It's the "lesser amounts" that confuses me. Does this mean that the additional signer(s) would not actually be responsible for the full $250M if both Sam and his parents were to flee? If so, this would seem to imply that the court has decided that Sam and his parents have non-tainted assets worth more than $250M, which doesn't match the story we've heard so far.
What I think it actually implies is that the surety given is a condition described by 18 USC § 3142(c)(1)(B)(xiv) and not 18 USC § 3142(c)(1)(B)(xii), and that people forget that (i)-(xiii) are examples of options, but do not limit the discretion provided by (xiv).
Unpacking that, (xii) says that "such surety shall have a net worth which shall have sufficient unencumbered value to pay the amount of the bail bond", while (xiv) says that they can instead "satisfy any other condition".
Does this mean that in your interpretation the headline $250M bail bond number is indeed nominal, and likely no one was required to show that they can actually afford to pay this amount? That if Sam does flee, the court accepts that it will likely collect less than this amount from the signees? And that bail could have just as easily been set at $1B, or $1T with no difference to the court as to his parents' ability to sign for it?
(I added an edit to the thread starter mentioning your correction)
Its not nominal, it is substantive: the bail amount is itself a financial condition—the penalty assessed for flight.
Requiring sureties (people who agree to be liable in the event of flight, for the full amount—his parents—or a partial amount—the other sureties—with a process that allows default judgement on prosecution request and irrevocably designates the court as the sureties agent for process, with only what amount to courtesy copies of any notices sent to the surety themselves at the last know address) is a separate substantive condition.
Asset qualification of sureties has a purpose, especially for arms-length sureties, but it is not what makes the bail not-nominal.
> That if Sam does flee, the court accepts that it will likely collect less than this amount from the signees?
I... would not interpret it this way. What I would say is that the court probably expects that the signees so not have nontainted assets sufficient to pay the bail.
However, should SBF effectively flee justice, that would mean the any criminal forfeiture would be avoided or indefinitely delayed, but evading the ability of the US government, when motivated, to enforce a default judgement may be... somewhat more difficult.
(Furthermore, I suspect if any of the involved parties were to be seen to start moving assets to facilitate that—and I would bet there is more than a little attention on that—there would be uncomfortable conversations and prosecution motions to amend bail conditions, at best.)
You typically don't put up the full amount, maybe 5-10%. The rest of the risk of you not showing up for your trial is assumed by the bail-bondsman or some other intermediary. Since people usually show up it is a good business.
As an aside, the problem with this system-- like a lot of the US justice system-- is that it favors people with wealth.
Wouldn't it be better then to pay the $250 million (if you have it) since you will get all of it back when you show up in court?
Now you understand what business bail bondsman are actually in.
I said "until recently" because IL became the first state to entirely outlaw cash bail this past election because heavily favors the wealthy and can destroy innocent people's lives while they wait in jail for trial. Now they can only hold someone if they can demonstrate that they are likely to offend again if released.
Are you saying they no longer take flight risk into account at all for release?
Do they take any consideration for ability to pay the i-bond?
I agree that it favors people with wealth, but don't really see a better solution, if you take that to mean detaining fewer presumably innocent people.
X People are low risk and should are released awaiting trial Y People seem higher risk but can be made low risk by providing collateral.
Eliminating Y just means more people in jail.
Are you sure it is just the wealth though? People get denied bail for smaller offenses like stealing from a store, because you know, they look a certain way.
Wealth buys comfort.
Constitutionally the purpose of bail is to ensure they don't flee and aren't a danger to the community while they await trial. It's not supposed to be a punishment since they haven't been convicted of anything yet.
So wealthy non-violent offenders should have the right to sit in lavish homes with an ankle monitor until they are actually convicted.
So: is the bail surprising? Yes. Is it a travesty of
justice? That’s a philosophical question. Is it legally
wrong, or outside the scope of what can or should happen
under the federal bail system? No.Nelson was an Amazon employee who worked on securing real estate deals for data centers. Based on an anonymous email sent to Jeff Bezos that Nelson was getting kickbacks on these deals where Amazon was being charged exorbitant leasing fees.
In 2020, the FBI showed up and seized (through civil forfeiture) the bank accounts and assets of Nelson, his wife, several associates and even his lawyers. What prompted this? It came to light later that Amazon's lawyers from a law firm named Gibson Dunn (who have been at the center of many controversies)met with the Department of Justice hundreds of times to get this outcome.
It turns out that the only way Amazon could get out of a bad deal was for someone to be charged with a felony. The one alleged here was deprivation of "honest services". It was on this basis the the FBI seized Nelson's assets. In doing so, Amazon falsely claimed they'd paid $16.5 million they had not paid.
After nearly 2 years and no charges being filed, the government returned a portion of the seized funds. It is alleged that Amazon made false represetnations (an actual crime) to the government and these formed the basis for the warrant to seize these assets. That warrant remains under seal. It's also alleged that Amazon lied about the leases they signed.
So, no charges filed (let alone a conviction) and all these assets seized under civil asset forfeiture, a regime that I personally think should be deemed unconstitutional as a clear Fourth Amendment violation. But alas, it remains the law of the land.
SBF has cleared stolen customer assets as CEO of FTX. Why exactly is the government not seizing every asset he owns, his parents own and his FTX associates own as here there is actually a good case that they are the proceeds of a crime?
[1]: https://www.bloomberg.com/news/newsletters/2021-03-15/the-st...
I find it utterly strange that people respond to injustice by asking why isn't more injustice being done, you know for equity?
It's even worse that law enforcement gets to keep the proceeds of seizing assets where there are no charges (let alone convictions) so we've added a profit motive for what should be unlawful search and seizure. Yay capitalism.
But that is the legal doctrine we operated under.
Unlike the Amazon case, there is a mountain of evidence against SBF, the new CEO has no doubt coopearted and provided ample docuemntation, there are 2 cooperating witnesses and charges have been filed. Through ownership of Bahamanian property (and who knows what else) there is a clearly evidence trail between FTX customer assets to SBF and SBF's parents and associates. It is all quite plausibly the proceeds of crime.
Basically, SBF walked into a bank, robbed it and then used the money he stole to post his bond.
Imagine you saved $100,000 from working and spending less than you earned, all completely legitimiately and legally. Now imagine that you make another $100,000 from, say, importing and selling a few pounds of cocaine.
You might think the government may come along and seize $100,000 from you. No, they'll seize everything. It's really difficult to separate money and the government won't even try. All of that could be forfeit.
Let me give you another example: imagine you're in charge of purchasing for a company. You send out and pay invoices on that company's behalf. Imagine you skim off the top and add $1,000 in charges or increased prices or fake items to a $20,000 invoice. You send out a $21,000 invoice, keep $1,000 and then pay the company $20,000. This is fraud. Imagine you get caught. You won't be on the hook for $1,000. You may be on the hook for the full $21,000. The entire invoice is fraud at that point.
Now this may seem unfair or unreasonable. I won't argue that. I'll simply say, that's not how it works. So once SBF committed fraud, which seems to be the case, he basically has the reverse Midas touch. Everything he touches from that point becomes tainted and the government and the courts are within their rights to seize it.
If his parents accepted any proceeds of that fraud, even unknowingly, the government can start seizing their assets too. In the Nelson case I talked about originally, the government seized the bank accounts from Nelson's lawyers. Think about that.
As others have commented correctly and more pithily than I have: the issue isn't is civil asset forfeiture justified (it isn't) but why those same rules are being applied inconsistently, much to SBF's benefit as he's walking free today.
There's a reason people say crimes that are punished with a fine are laws that only apply to poor people.
If he was a wealthy donor to Trump in an identical case he'd be rotting in Rikers with no hope of bail.
Take the Chevron case I mentioned in another comment. Deputizing an oil and gas law firm to criminally prosecute someone in the US for what they did in Ecuador began in the Trump administration. Biden's DoJ could intercede in the case and dismiss it. But they haven't. So there's no difference here between the two parties.
You'llsee that a lot. When it comes to any issue like this the government (including the White House, Congress and the courts up to and including the Supreme Court) will side with the wealthy most of the time.
Go back and look at any issue you might think is a partisan issue where you think someone is getting persecuted politically and really examine it through the lens of who has the money in that situation. That will determine who these institutions side with more often than not and way more than any supposed political leanings.
Posters here are merely pointing that out.
Gibson is one of the most respect law firms in the United States. It is certainly possible that they took some sort of nefarious action, but I find that unlikely, and see no suggestion of proof here.
An article quotes this:
>>Carleton Nelson denies the allegations. His lawyers have said in court that broad allowances for outside work in his Amazon employment contract gave him leeway to do business with Amazon clients and customers.
Well, sounds to me like Nelson took the kickbacks and the argument is whether he did a good enough job papering them to look like real transactions.
https://www.geekwire.com/2022/former-seattle-entrepreneur-an...
As for no damages:
>> Amazon notes that its initial calculation of damages included damages attributable to inflated rents and fees it had agreed to pay to lessors that were controlled by the defendants.... Amazon has now been able to negotiate amendments to the leases, which has mitigated, but not completely eliminated these damages
So seems like the problem was resolved because the fraud was discovered and remedied, not that there was no fraud to begin with.
https://twitter.com/Amy_K_Nelson/status/1489227415108919297/...
Notable cases [1] includes:
> The firm is representing Chevron in its long-running, $27 billion environmental dispute in Ecuador
This is the case of Steven Donziger. I highly recommend you look into it because it's another travesty of justice. Donziger helped the Ecuadorian government secure a multi-billion judgement against Chevron for pollution. Chevron responded by finding a judge to appoint Gibson Dunn to engage in private criminal prosecution alleging fraud in the US for a case in Ecuador. Donziger spent years in home detention and had an $800,000 bond for misdemeanour in refusing to turn over his laptop to that court even though said laptop was clear work-product (and thus covered under attorney-client privilege) with the Ecuadorian case.
> The firm represented George W. Bush in Bush v. Gore
Okay...
Here is perhaps the most disturbing entry:
> Gibson Dunn is representing the plaintiffs in Haaland v. Brackeen pro bono in seeking to overturn the Indian Child Welfare Act.
The law firm isn't even paid on this one. Free of charge they are trying to end tribal sovereignty [2].
> Well, sounds to me like Nelson took the kickbacks
Why does it sound that way? No, seriously. Amazon has seemingly made false statements regarding money paid ($16.5m) and kickbacks received without providing any evidence. Any claims they have made would be documented in the affidavit, which both Amazon and the DoJ have fought to keep sealed.
And if that's the case why were no charges ever filed?
This is an opportunity for introspection here. Please, for your sake, ask yourself why your kneejerk reaction here is to side with Amazon.
[1]: https://en.wikipedia.org/wiki/Gibson_Dunn#Notable_cases
Whew! This ought to piss off a LOT of people who couldn't afford to pay bails in the range of 1,000s-10,000s of dollars.
250M on a written IOU with (almost) no collateral to back it up, that's insane.
But seriously, there are probably enough people willing to buy that house.
That is really the crux of the matter, and where people are (reasonably) disagreeing with you. Does a $4M bond (from his parents' assets, not his) and a $246M IOU really ensure SBF will show up in court rather than fleeing?
Reading about it a bit, it seems many of them are simple to remove (not sure what kind of monitor SBF is wearing), but that indeed, it will be detected immediately.
Having someone pay attention is also all that you need to prevent the world's most wanted man from hanging himself in a federal prison in Manhattan.
Cruel and unusual punishment does not apply here, and isn't really clearly defined regardless.
I personally agree that not holding him is good fwiw.
However, it also is horribly inconsistent. People who are guilty of driving while black, or non-violent drug offenses, or so on, are given much less generous treatment when it comes to unsecured bail, and when it comes to evaluating if they're a flight risk.
There's several factors at work here, but the most significant is that most offenders, especially most low-level offenders, are charged in state systems, and most (but not all, and this is changing, erratically) of the state systems rely much more heavily on financial conditions, and on secured bonds as the primary condition, in part due to very intense lobbying by the bail bonds industry to state governments (both directly and using astroturf groups to lobby the citizenry when their position is threatened.)
https://constitution.congress.gov/browse/essay/amdt8-2-2/ALD...
States also have their own amendments that can differ on bail as well.
This is a punk (he is a prick) who wouldn't know how to wield a butter knife. He agreed not to have an extradition hearing in the Bahamas. He's hardly a danger to others or a flight risk.
Denying bail because we think this guy is extra guilty (as opposed to, say, because he has a history of domestic abuse, and releasing him could put people at risk) would be cruel and unusual, because it would be discretionary.