(NewsNation) — As former FTX CEO Sam Bankman-Fried faces what some prosecutors are saying is the biggest fraud investigation in the history of the country, there are also questions being asked about his parents’ connection to the company.
Cryptocurrency exchange FTX, which attracted endorsements from celebrities, athletes and business titans, filed for bankruptcy after experiencing the crypto equivalent of a bank run. Bankman-Fried resigned, and was later arrested in the Bahamas. Federal prosecutors said the embattled former CEO intentionally deceived customers and investors to make himself and others rich, and that he played a central role in FTX’s collapse.
In a 13-page indictment, it is alleged that Bankman-Fried illegally diverted FTX customers’ and investors’ money to cover expenses, debts, and risky trades at the crypto hedge fund, Alameda Research, which he started in 2017, as well as to make lavish real estate purchases and large political donations.
Now, Bankman-Fried’s parents are under scrutiny, the New York Times reports, although no evidence has emerged linking them to the failure of FTX.
Joseph Bankman, Sam’s father, works as a tax law professor at Stanford. A family spokesman says Joseph Bankman worked for FTX for almost a year, helping with charitable operations and recruiting lawyers in the company’s early days. He allegedly traveled frequently to the Bahamas where the company was based, and last year he advised his son during meetings on Capitol Hill as he got ready to testify in front of a congressional committee, according to the Times.
Sam Bankman-Fried’s mother, Barbara Fried, retired from teaching at Stanford and was the head of a political advocacy network called Mind the Gap, which, the Times said, she helped start to support Democratic campaigns and causes. The Times wrote that Sam Bankman-Fried was among the donors for the network, though his mom later resigned.
Bankman-Fried maintained in an interview with the Times that his parents “weren’t involved in any of the relevant parts” of the business, such as the balances or risk management.
If convicted on eight criminal charges, Bankman-Fried could face up to 115 years. Even if that happens, though, there’s no telling when, or if, FTX investors will get all of their money back. New CEO John Ray III said at a House Financial Services Committee hearing Tuesday that not all customers’ losses will be recovered.
“Money was spent that we’ll never get back,” Ray said, adding that the recovery process could take months.
Mitchell Epner, an attorney with the law firm Rottenberg Lipman Rich, PC, said that there were two buckets of people who put money into FTX: those who thought it was going into what essentially was an electronic safe deposit box, meaning that their funds would not be lent out, and those who thought they were investing.
“I am pretty certain that the people who had custody accounts will get all of their money back before anybody who was investing in risk will get any of their money back,” Epner said on “Morning in America.”
The Associated Press contributed to this report.
