SBF’s legal defense is being funded with Alameda money he gave his father
forbes.com
forbes.com
Atleast SBF took the extra step of first funneling money to Alameda and then directing Alameda to send it back to him and then send it to his dad as a tax free gift.
That way he could honestly say he personally has no money left.
That atleast makes it harder for FTX to claw back that money.
One interesting thing a lawyer pointed out to me is that a lawyer has a duty to ensure that the money used to pay them wasn't from the proceeds of a crime.
I wonder how SBF's lawyers have done thier diligence in this case and satisified themselves that this wont' get them into trouble with the state bar.
Edit: Er, I guess it's $16,000.00 without needing to report it, and then anything above that can be offset against a $12 ish million lifetime exclusion.
https://money.usnews.com/money/personal-finance/taxes/articl...
Also, as a reminder, the gifter pays the tax and not the person who received the gift. If someone gifts you an illiquid asset, you aren't forced to go into debt to pay a tax. But the gifter has to figure things out on their end.
When gifting large amounts of money, the IRS gets more money on top (so, if you're super rich, don't gift ALL off your money, and leave some aside for tax season).
If you give away $12.06 million on the day before you die (which would be tax-free), then the entirety of your estate is taxed at 40% (both 2022 numbers). If you die without having made any gifts exceeding $14k, then the first $12.06 million of your estate is not taxed at all, and the remainder is taxed at 40%
Every rich person has a guy who will tell them how to avoid it legally. Every poor person never had any money in the first place. It only ever hits middle class and upper-low class people who saved money for some of their life and were never told that they had to disburse their assets at X-1 years before they planned to need care and get hit with a huge penalty to their assistance when they inevitably have to move some of their cash around to pay for some of their expensive care.
If you don't want rich people getting public funds for things, you have to be able to look beyond their money games, which is hard, expensive, often purposely sandbagged, and not usually successful.
So just tax them their whole life instead, and let them get back some of what they put in with every other person.
I am relatively poor and this will help me because even though I am poor I still have to prove I am poor which is burdensome.
https://www.schwab.com/learn/story/estate-tax-and-lifetime-g...
EDIT: read a little further, guess the 11-12 million exemption only lasts until 2025, so if you can use, do it fast.
I guess what I’m saying is, it wasn’t a way to hide the gift, because it still triggered the need for a gift tax return filing.
I am pretty sure it's the source of the money that matters more (legal vs. illegal) than whether the accounting tricks are legally sound.
What you're saying sounds like "at least he wasn't a complete numb-nuts", but that's not much of an "at least" in this scenario.
I am pretty sure the courts will be looking for an "at least he wasn't stealing from his customers".
At least, that's the sane hope.
The 'Madoff Recovery Initiative' was incredibly aggressive in going after all of Madoff's family and acquaintances. SBF's family and acquaintances are going to be fighting lawsuits for years and will lose millions.
millions they arguably shouldn't have had in the first place, since they were proceeds of crime.
If that's true, it seems a bit ridiculous. SBF is pleading not guilty. Are his lawyers supposed to do their own little investigation to figure out whether their client is actually guilty?
Run the following thought experiment.
You are a lawyer. Your client is accused of robbing a bank. The bank has the serial numbers of the bills taken. Your client pays you in cash and the serial numbers match the stolen ones.
if you agree that you are being paid by the proceeds of a crime, then congrats you agree with the law and now all you are figuring out is where the line is.
Turns out its somewhere between a forensic audit of your client and 100% certainty that you're being paid with stolen funds.
The government or prosecution claiming the funds you're being paid with are from the proceeds of crime is well within the ethical and legal bounds that lawyers are held to.
Like many issues when it comes to professionals, there is often a burden on the professional to make sure they are acting ethically. Engineers can't build a building to a clients spec if it would be dangerous. Doctors have a duty of care to not harm a patient even if the patient wants to be harmed and lawyers have a duty of care to know the origins of the funds paying them.
That's one of the burdens of being a professional
Courts are more than happy to adjudicate if there is a gray area.
Also if that doesn't convince you then remember, people can be forced to hand back assets that were stolen even if the owner had no way of knowing ti was stolen. The lawyers don't want to spend all that time defending SBF and be paid with stolen funds, just to have the courts come and tell them to pay back the money as it never belonged to SBF at all.
It's in their own best interests to know and vet where the money came from.
(I realize there a much broader claims being made in this thread, like about where the payment money is bad and what obligations that prompts. I'm not attempting to address issues such as those, just the narrower topic above.)
Actually yes, they are supposed to do that. Not because of money, but as they are preparing the defense.
PS: I am not trying to defend SBF here and I hope that that any money linked to Alameda/FTX, including the money he sent to friends and family, is clawed back. But that's a separate issue.
Let's not put the cart before the horse. It's the law firms obligations to make sure they aren't participating in a crime, it has nothing to do with assuming someone's guilt.
It's "innocent until proven guilty in a court of law". Not necessarily in your lawyer's office.
> Requiring a lawyer to know whether their client is guilty in advance amounts to asking them to predict the outcome of that process, to foresee the future.
No, that's a different thing. Requiring a lawyer to know the facts is not requiring the lawyer to know how the court will rule in the case.
Lol, since when? Oh, your honor, I didn't know murder was BAD!
> Otherwise, you would be taking a big gamble anytime you accepted money from strangers.
Really? Hasn't been an issue for me at all. Are you sure it's that big of a gamble? Maybe you should think about the kind of people you are accepting money from?
> It would be quite impractical.
As I said, hasn't been a problem for me. And I'm an attorney too! I get paid!
> Also, it goes beyond mere ignorance, it's unknowable. SBF's lawyers will find out whether he is guilty on the day that the verdict is pronounced.
This is literally the opposite of what you described. They are lawyers with expertise in this exact kind of crime and they are well aware of the risk presented by taking money from him. They know he stole money. They know he stole money and saved it for himself.
It's a bit sad that you are an attorney and don't seem to believe in due process. If his lawyers "know" that he is guilty, I hope for his sake that he finds lawyers that don't "know" it, given that he is pleading not guilty.
Well, when should it be an excuse? You didn't really seem to offer any bounds, and I put it as "a crime".
>It has to be the least enforced law ever... Because the chances of breaking that law as a phone company, or as a taxi driver are close to 100%.
I don't think the law is really targeting taxi companies or phone companies. It's targeting people who abet criminals by taking their money in exchange for services or goods.
>It's a bit sad that you are an attorney and don't seem to believe in due process.
It's not a surprise that you think that considering you clearly have no idea what due process is.
>If his lawyers "know" that he is guilty, I hope for his sake that he finds lawyers that don't "know" it, given that he is pleading not guilty.
Geez, I can't state it enough for you, huh? "Knowledge" is not an element of the crime. So everytime you say they "know" something, it's completely irrelevant to the issue and only reflects your willful misunderstanding of this entire conversation.
Umm, yes? Not because of the money thing, but in order to do their job properly.
I'd think that if they were doing their job properly, it would be pretty clear pretty quickly whether or not their client is guilty. And whether or not their client is guilty is important for them to know, because it will definitely affect how they proceed with defending their client.
I don't think this is true in the US. Lawyers do not have any obligations under the Bank Secrecy Act or laws that would require this and there are other things like the text below that would make prosecuting a lawyer for this very difficult,
https://www.law.cornell.edu/uscode/text/18/1957
> (1)the term “monetary transaction” means the deposit, withdrawal, transfer, or exchange, in or affecting interstate or foreign commerce, of funds or a monetary instrument (as defined in section 1956(c)(5) of this title) by, through, or to a financial institution (as defined in section 1956 of this title), including any transaction that would be a financial transaction under section 1956(c)(4)(B) of this title, but such term *does not include any transaction necessary to preserve a person’s right to representation as guaranteed by the sixth amendment to the Constitution;*
https://www.justice.gov/jm/jm-9-105000-money-laundering
> Because the Department firmly believes that attorneys representing clients in criminal matters must not be hampered in their ability to effectively and ethically represent their clients within the bounds of the law, the Department, as a matter of policy, will not prosecute attorneys under § 1957 based upon the receipt of property constituting bona fide fees for the legitimate representation in a criminal matter, except if (1) *there is proof beyond a reasonable doubt that the attorney had actual knowledge of the illegal origin of the specific property received (prosecution is not permitted if the only proof of knowledge is evidence of willful blindness);* and (2) such evidence does not consist of (a) confidential communications made by the client preliminary to and with regard to undertaking representation in the criminal matter; or (b) confidential communications made during the course of representation in the criminal matter; or (c) other information obtained by the attorney during the course of the representation and in furtherance of the obligation to effectively represent the client.
this is a good response
https://www.moneylaunderingnews.com/2018/09/use-of-tainted-a...
Turns out its not black and white as people expect
- lawyers fees can be clawed back due to asset forfeiture.
> Federal forfeiture laws, on the other hand, pose a different kind of risk for lawyers — one that the Safe Harbor Provision does not protect against. Forfeiture laws are premised, in part, on the notion that tainted assets belong to the government as of the date the underlying offense was committed
- while its true that courts have decided that taking all of a persons money so they can't pay for their defense has been ruled illegal by the courts the amount of money that lawyers think the client has can be significantly reduced by the courts. So if SBF has say $20M now, the courts can claw back 75% of that leaving the client with far less to pay than the lawyers originally though.
Or put another way, you are entitled to a defense, you are not entitled to have unlimited funds to pay for your defense.
Also given that the money is coming from SBF' dad( a third party) and not SBF this seems to be relevant.
> Moreover, the Fourth Circuit has held in a divided decision that the Safe Harbor Provision does not apply in instances whereupon an attorney “receives and deposits” tainted funds from a third-party payer.
Isn't this worse for him in the long run if he's found guilty though? Words like "structuring", "posturing", "evasion" come to mind...
As much as I want to see that scammer and his family rot in jail , as much as I find "structuring" totally unfair.
If you set the limit to, say "$1 K / day" and then someone does "$1 K / day, everyday", it's not doing anything wrong. Instead of inventing the concept of "structuring", instead write the actual limits more clearly: "$1 K / day, $10 K / year max" (for example). Then it's clear that the limit is $1 K / day max and that you can only do it up to 10 times a year.
For otherwise it's just one of the oh-so-many arbitrary rules invented so that even honest people may be, unknowingly, doing something illegal.
Laws against structuring makes me think of this: "The more numerous the laws, the more corrupt the state".
The state should make the law clear or go fuck itself.
> (in December, their $1.8 million Palo Alto home was used to secure a $250 million bail package after Bankman-Fried was released on a personal recognizance bond.
Their Palo Alto home is worth only $1.8M? Do they live in a 1BR/0.5BA shed?
edit: Apparently the assessed value (for property taxes) is $1.8M. But realtor sites estimate it at $3.1M, and it was apparently renting for $12,000/month back in 2013. Still cheaper than I thought for a 4-br home on Stanford's Dish
https://sfstandard.com/business/inside-sam-bankman-frieds-pa...
Do we think Stanford is lacking in people willing to live there? I bet it may even increase the chance (so long as the HOA is not all that bad!)
The thing limiting the value is the other restrictions that Stanford imposes on these houses - namely they essentially control the price the houses sell for because they all have to be financed through a Stanford-controlled lending program.
From an objective, outside perspective, it's definitely weird to say, "Put up $X to assure us you'll actually appear for trial. Oh, you're putting up .01X? Okay, we're cool."
Like, even accepting the validity/logic of the cash bail system, they should just be honest and call it .01X bail. The full X is never actually used for anything beyond "look at us, we're a serious court, taking this flight risk seriously".
(To pre-empt a thoroughly well-tread response from the previous threads: Yes, I know, in SBF's case, the parents are on the hook for the rest of the X, so X is, in a sense, "used". But their net worth is nowhere near X -- more like .04X -- so that just pushes the farce ratio down to .96X, which, while better than .99X, is still pretty darn close to X.)
My earlier comments about this absurdity:
What is historically weird in the history of money-involved bail is the practice of having a penalty plus either full-value security or arms-length employment of a government-licensed agent as surety with a government-set fee schedule; penalty, surety, and security are three separate levers to acheive compliance.
What’s weird from a system outside of money bail world is...money bail.
The federal system of the courts having freedom to adjust the compliance levers independently to acheive what they feel is necessary sufficiently acheive compliance is weird only from the perspective of the system that has evolved away from that in state practice (and the even more divergent image of that state practice that has been advanced by popular media portrayals and misunderstandings.)
> Like, even accepting the validity/logic of the cash bail system, they should just be honest and call it .01X bail
Would you view a $100,000 non-dischargeable, non-expiring debt to the federal government when you have $100,000 in current assets as equivalent to $10 million non-dischargeable, non-expiring debt to the federal government when you have $100,000 in current assets?
>Would you view a $100,000 non-dischargeable, non-expiring debt to the federal government when you have $100,000 in current assets as equivalent to $10 million non-dischargeable, non-expiring debt to the federal government when you have $100,000 in current assets?
Would you view the $10 million as anything other than a number that attempts to sound big but will not have any meaningful impact?
I can see $100k vs $200k as being a meaningful distinction, but not $100k vs $10 million (re-read the farce-ratio part).
>What’s weird from a system outside of money bail world is...money bail.
Did you miss this part?
>>Like, even accepting the validity/logic of the cash bail system,
Well, I addressed:
(1) What was weird within the history of money-involved bail, and
(2) What was weird outside that context, and
(3) Why the federal system was not #1, and
(4) What context the federal system was weird in.
So…no?
Did you miss…my entire post?
If you want to dispute the “not weird” label, you should reply to the person originally making it. As it stands, you’re responding to something I didn’t say while implying you’re correcting something about it and getting in your virtuous anti-cash bail jabs (to say nothing of the word salad in your paragraphs 1 and 4 — try quotes or something to make it easier to parse).
This changes the pool of potential buyers, and therefore the market is quite different than the normal Palo Alto market.
My GUESS is that since he's being prosecuted for fraud, et al, they can't say these were illegally obtained (innocent until proven guilty) and therefore they can't seize the funds yet.
And if the lawyers are in on it, they're over billing and keeping building an escrow fund that would go back to one of them at the end.
The scumminess is rather impressive.
The ones in charge of the bankruptcy are also bleeding the customers and investors dry. They charged $700 million in the Madoff case. There are $10 bn missing here. It's not unthinkable they'll steal 10% of that.
They are vermins, just as scummy as SBF. But it's legal.
It seems obvious that nobody should benefit from the results of their crime.* But if the accused is innocent until convicted, shouldn't it be OK to spend the ill gotten gains on their defense? After all, if they win the gains were legitimate, and by induction they were legit until conviction.
How is this circle squared in practice?
* this principle is more easily stated than enforced. Some places don't allow convicted criminals to earn any money from writing a book about their crimes (this rule seems reasonable) but where does it end? Apparently Bernie Madoff got respect in prison for the magnitude of his theft. That was a benefit of sorts...
This has been heavily abused in California and elsewhere [1][2] to seize assets from marijuana dispensaries or "suspected drug criminals". Cops seize product and money, never file charges, and then let the business owners fight for months/years to get their property back (often times with the seized product having long since expired), despite no charges having been filed.
IMO it's an egregious violation of the 4th amendment and it's maddening that more isn't being done to stop the practice.
[1] https://reason.com/2022/02/04/a-california-sheriff-remains-f... [2] https://www.newyorker.com/magazine/2013/08/12/taken
No, this is basically what criminal forfeiture, and freezing assets potentially subject to it, is designed for.
Civil forfeiture was designed for trade protectionism in the British Empire, but then it became an end-run around criminal process in the US, particularly around Prohibition.
And in this case the "creditor" would be the FTX bankruptcy estate, led by whomever has been appointed the receiver. Theoretically they should be working for creditors of FTX, but can obviously have their own motivations of expediency, not wanting to rock the boat by suing another firm, etc.
This is…not an exceptional case in that regard, AFAICT.
(RICO has a very specific definition of a criminal enterprise which, while it may occasionally apply to something that doesn’t look very much like the Mafia, usually doesn’t. It is not “any enterprise that involves crime”. There are a whole lot of predicate offenses, but they aren’t all crimes, and the enterprise has to relate to them in a particular way.)
I'm not defending asset seizure: it's become a way for the government to steal assets without trial. But SBF cleverly made it what lawyers like to call a "close legal question" by funneling the money to his father as a gift.
(Naturally pointing out Forbes' role in pimping Sam Bankman-Fried in no way is supporting the 'wunderkind' or his & co.'s fraud.)
1. How is it that a supposed $250 million bond was secured with (according to news articles) significantly less value than that in assets? How does that work? The collateral seems to be his parents' house, a few hundred thousand in cash assets and little else beyond that. Huh? So what makes this a $250 million bond?
2. The government can (and routinely does) seize assets without the owner being convicted of anything. Hell, they do it when the owner never gets even charged with anything. To me, this is a clear 4A violation and should be unconstitutional but the 4A holds no sway over current judicial politics so here we are.
In this case we have clear evidence of fraud. Pretty much anything SBF touched with FTX or Alameda money can quite reasonably be presumed to be the proceeds of crime. Why on Earth in this case is the government not seizing, well, everything?
Bear in mind that the legal standard for this is quite broad. If you buy a $1 million home with $100,000 of fruad proceeds and $900,000 of your own money, those fraud proceeds taint the entire asset, not just the portion directly tied to fraud. As such, any money given by SBF to anyone poisons pretty much every asset the gift-receiver owns. The government would be well within its right to seize or at least freeze pretty much everything.
So how have SBF's parents escaped the government's seizure net?
If you think about it, it's the equivalent of robbing a bank and then using those stolen funds to pay for your bond and lawyer. The government wouldn't stand for that in the case of armed robbery. Why are they here?
That’s…just the way federal bail tend to work [0].
> So what makes this a $250 million bond?
Because that’s what SBF and his parents have consented to become jointly and severally liable for, with essentially no available defense (bail forfeiture is essentially an automatic default judgement) if he fails to appear, etc. The “bond” is the agreement to be subject to that liability. Security for the bond is a separate thing, and unlike many state systems, full-value security or the involvement of a licensed bail agent isn’t a norm that applies.
> The government can (and routinely does) seize assets without the owner being convicted of anything. Hell, they do it when the owner never gets even charged with anything. To me, this is a clear 4A violation and should be unconstitutional but the 4A holds no sway over current judicial politics so here we are.
> In this case we have clear evidence of fraud. Pretty much anything SBF touched with FTX or Alameda money can quite reasonably be presumed to be the proceeds of crime. Why on Earth in this case is the government not seizing, well, everything?
Believe it or not, even if you don’t like the process, there is legal process involved in seizures of assets suspected to be proceeds of a crime (including if they are not going through civil forfeiture, but being held as subject to future criminal forfeiture, which seems more likely in this case). “It appeared in a news article” does not fulfill the procedural requirements on its own.
[0] actually, its more of a mixed bag, IIRC, because the individual districts have their own practice, but its how federal bail often works, and in SDNY particulary.
I believe it boils down to "making a statement". Even if SBF's friends and family were only able to offer up $2.5m in assets (i.e. 1% of a $250M bond, instead of the more common 10% threshold), it's still (according to the court) a massive disincentive for SBF to flee. But the court still wants to assert that he's accused of crimes that merit such a massive bond.
From Bloomberg:
https://www.bnnbloomberg.ca/sbf-s-250-million-bail-is-one-of...
> Such bonds also signal the seriousness of the crime being charged, and federal prosecutor Nicholas Roos made that point in court.
> “Mr. Bankman-Fried perpetuated a fraud of epic proportions stealing billions for customers lenders and defrauding investors,” Roos said.
That said, with the revelation in today's Forbes story, I wonder if knowing that Mr. Bankman had $10M worth of gift money from his son was known to the court at the time, or relevant to the bond agreement? i.e. would the court have demanded that money be stashed as collateral along with SBF's home? At the time the bail was announced, SBF was claiming his personal assets were in the $100,000 range
The “more common 10% ‘threshold’” isn’t actually a threshold for security pledged to the court, It’s the fee paid to a licensed bail agent (very often, legislated as the fixed or minimum fee for that service in state law) to stand as surety as an alternative to the defendant offering full value security.
But, again, that’s a common feature of state bail systems, not the federal system, which can be much more flexible.
> That said, with the revelation in today’s Forbes story, I wonder if knowing that Mr. Bankman had $10M worth of gift money from his son was known to the court at the time, or relevant to the bond agreement
If it wasn’t (or if the evidence that it was stolen hasn’t already been reviewed and considered by prosecutors), I would expect further action related to bail conditions and possibly freezing/seizure of that money in the near future.
By the way, that was 2 years ago. The government ultimately settled and returned most of the money. No one has ever been charged.
So why is SBF getting the kid glove treatment? In other circumstances, based those gifts, SBF's parents' assets would 100% be seized.
I stand by my assertion that SBF secured his release with the proceeds of the crimes he committed.
[1]: https://reason.com/2022/02/18/fbi-seized-almost-1-million-fr...
He's not paid $18 million to deal with any single problem with the money of a firm that kept no ~books, but had >100 offshore shell companies to conceal the flow of money, and a million people screaming at it that they are owed money. He and his team is paid to deal with the whole thing.
Also, about $10 million of that has been legal fees. [1]
[1] https://www.cnbc.com/2023/02/08/ftx-bankruptcy-fees-near-20-...
$18 m? I thought they charged $700 m to claw back money in the Madoff case. (I may be off by one order of magnitude though). People in charge of these claw backs are thieves too and they go for easy money, legally, with the benediction of the state, at the expense of people who've been scammed.
Maybe I've just met a bad batch.
https://www.tandfonline.com/doi/full/10.1080/09515089.2012.7...
> However, on no issue did ethicists show unequivocally better behavior than the two comparison groups.
https://www.tandfonline.com/doi/abs/10.1080/09515089.2019.15...
> Our results indicate a successful replication of the original effect that ethicists do not behave any morally better compared to other academics across the vast majority of normative issues.
Might be small sample, but that sample is also biased to have a lot of knowledge about what they are preaching (supposedly), meaning they put higher importance about it compared to other things.
You'd expect Pastors or Ethicists to be more moral/ethical because they spend a lot of time thinking about being moral/ethical compared to members of the general population. Seems pretty intuitive to me.
Pastors... it depends on the pastor. Is it a job, or something they actually believe? Is it just a theory to them, or do they have any actual power helping them live it out?
In fact, on this interpretation, if we find ethicists are no more ethical, then we must conclude they are actually _less_ ethical than normal people, since they have more occasions where they could make an ethical decision but do not. Or we have to admit that most ethical quandaries are trivial, so that being an ethicists doesn't give you any special advantage.
[1] It would depend a bit on what sort of pastor and what sort of congregation.
https://psychcentral.com/pro/do-marriage-family-therapists-h...
At least they know the course material well. Isn't that the reason why you're really enrolling in the class for?
Nothing about a university that would let Condi Rice serve as provost screams "ethics", frankly. Their history is not one that suggests a strong ethical culture.
Is altering a digital artifact for someone else to be used for financial gain on their part ethical?
Transitive property says no; you're an accomplice intheir deception. The only people who tend to assert Ethics courses aren't there to help you be a better person are those that never started out with an intention to be ethical at all. At least in my experience.