Journalists reveal the role of SBF’s parents in building the FTX empire

Parents of former FTX chief SBF — Stanford professors Joseph Bankman and Barbara Fried — played a key role in turning their son from a bookish student into a connected crypto magnate. Bloomberg reached that conclusion.

Both had distinguished careers long before SBF’s alleged fraud, having spent more than three decades at the university’s law school.

Typically, the media portrayed the parents as spectators who offered emotional support to their son during proceedings. But their names are almost certain to surface during the trial, journalists said.

Earlier, in an interview with the New York Times, SBF said that his parents “were not involved in any of the relevant parts” of the group of companies. This was allegedly true only regarding the former CEO’s younger brother Gabe Bankman-Fried, who was involved in charitable projects at FTX.

At the same time, former employees and business partners of the indicted executive signaled that they had formed a different impression.

Joseph and Barbara regularly appeared in the organization’s offices, offered words of encouragement to staff, and were included in internal communications. Their reputation and connections were essential components of the success of FTX–Alameda Research.

In the early days of his son’s business, Joseph Bankman acted as a lawyer. He described himself as having “extended a helping hand” and shown “his usefulness”.

Sam Bankman-Fried’s father helped draft the first legal documents. They indicate that Bankman Sr. attended meetings and was involved in tax issues and the development of marketing materials for FTX and its utility token FTT.

Sources emphasized that Joseph played a key role in deciding to relocate to the Bahamas after tightening oversight in Hong Kong, where the company was based. The firm’s chief legal officer became Daniel Friedberg of Fenwick & West, whom Bankman Sr. personally hired.

Staff impressions were that SBF always wanted to first “call Joe” before approving any given legal proposal.

Sam’s father asked specialists about their personal lives, joined in games, and appeared at corporate lunches. He was seen as a “friendly old man” — a figure who was there to prevent his son from losing control in his communications with subordinates.

One of the platform’s key investors (allocated $150 million) — Sequoia Capital — explained its decision to back SBF’s venture by his work on Wall Street and the upbringing of his parents — Stanford law professors.

In 2021, it was they who approached the venture firm and were able to dispel concerns about potential legal and regulatory risks of investments in the crypto exchange. A key moment could have been a phone call by an unnamed former employee of the SEC, who privately advised the firm on previous deals and now teaches at Stanford.

A former official voiced support for FTX’s legal strategy, which involved operating abroad while pursuing US regulatory approvals. In the discussion, he also noted that Bankman-Fried was the son of his friends.

“The parents really opened doors for Sam”, said one of the interviewees.

By then Barbara Fried had organised the political movement Mind the Gap, which advised prominent tech donors, including former Google CEO Eric Schmidt and LinkedIn co-founder Reid Hoffman.

In 2020, he donated $5 million to the Mind the Gap structure (in 2022 — already $40 million), and SBF instantly became a player in the District of Columbia (the capital Washington, D.C.).

Bankman Sr. began accompanying his son to meetings with regulators and elected officials. He also appeared at FTX events as a representative of the company’s philanthropic ambitions.

In particular, Joseph promoted digital-wallets for the least well-off residents of South Florida instead of bank accounts, promising that the exchange would fix costly transfers.  

Against a backdrop of SBF’s proclaimed modesty (Toyota Corolla, worn sneakers, living with colleagues), FTX “devotedly spent money”, turning the office into the Emerald City from The Wizard of Oz.

When the company teetered on the brink of bankruptcy, Bankman-Fried appealed to his father for help in minimising the damage, publicly stating that there were no problems with the platform.

As they spoke with investors, the father and son tried to manage a bank run. In particular, on November 7, SkyBridge Capital chief Anthony Scaramucci heard about a liquidity shortfall of $1 billion. On the next call the figure rose to $4.5 billion. Later the figure was already about $7 billion.

“I think Joe wanted to help his son. … You want to think of your children only the best”, one of the interviewees commented.

Immediately before the bankruptcy filing, SBF’s father urged regulators and creditors not to rush to a decision. He called the FTX managers “just children who made a mistake”, promising that they would return the money.

After the exchange’s problems came to light, the friends of the parents were shocked. They tried to understand how two people famed for their ethics could be so closely connected to the largest fraud in U.S. history.

After the arrest of SBF Bankman-Sr cancelled his courses, and Fried, who had left her school two months before the collapse of FTX, left Mind the Gap.

“Hard to imagine how they could not have known? The most I can concede is that it was blind faith. They did not have the full picture”, said one of the interviewees.

Bloomberg suggested the plausibility of this version. Bankman-Fried, according to those polled, was a sociopath and deceived not only investors but also business partners and even his own employees. 

It would not be an exaggeration to suppose that he could have used his own parents, along with their distinguished academic careers, to drum up support for his venture, the journalists suggested.

But even if they did not know about the alleged misappropriation of funds, critics say, the parents deserve some blame.

The ethical compass of SBF’s mother might explain how her son could fail to notice obvious moral shortcomings in the name of what he considered the greater good. If you follow this line of thinking: what is a little misappropriation of funds if the end result is billions of dollars for charitable organisations saving the world? Fried developed such views in one of her most famous articles.

Joseph, as noted above, played a key role in the formation of the business empire.

“In a sense, Bankman Sr. was the founding father of the company”, one source concluded.

Hearings on the charges will begin on October 2. The prosecution has not charged SBF’s parents.

Sam Bankman-Fried was charged with 13 criminal offenses. Later, prosecutors dropped the charges relating to financing some politicians as part of a deal with the defense. The founder of FTX did not plead guilty to any of the charges, including bribery of a Chinese official.

Recall that SBF directed funds from a gift he made to his father using money borrowed from the platform to cover court costs.

The total payments in the form of salaries and loans to the so-called inner circle of the Bankman-Frieds amounted to $3.2 billion, including $2.2 billion to him personally.$2.2 billion.