S.B.F. is leaving campus. But Stanford’s ties to his case are deeper than previously known

Aug. 13, 2023, 12:34 p.m.

Crypto magnate Sam Bankman-Fried was scheduled to speak to a Stanford class this past winter, The Daily has learned. The topic of the course? Tech ethics. Bankman-Fried wouldn’t have the opportunity to give that lecture, though — instead, before the winter quarter even began, he was placed under house arrest just a stone’s throw away from the lecture hall, confined to a home on campus owned by his parents, Stanford Law School (SLS) professors Joseph Bankman and Barbara Fried.

His stay at Stanford came to an end Friday, when Bankman-Fried’s bail was revoked by Judge Lewis A. Kaplan over alleged attempts at witness interference. Instead of his parents’ $5 million house, Bankman-Fried is now confined to the Metropolitan Detention Center in Brooklyn. But the Stanford community’s ties to his case, already well-reported, are even deeper than previously thought. New court filings allege that Bankman and Fried were themselves improperly enriched, and exclusive Daily reporting shows that Bankman continues to serve in official capacities at the school.

Bankman-Fried’s breach of bail conditions may cause his parents, as well as Stanford researcher Andreas Paepcke and former SLS dean Larry Kramer who helped guarantee Bankman-Fried’s $250 million bail, to forfeit the collateral they put forward, further increasing the cost of an already expensive legal battle. According to Kaplan, Bankman-Fried “has gone up to the line over and over again,” speaking to media and violating repeated instructions on the limits of his house arrest.

Bankman-Fried, once considered a wunderkind of Silicon Valley, made billions of dollars as the founder of crypto exchange FTX and trading firm Alameda Research. It all came crashing down after reporters revealed holes in FTX’s balance sheets and prosecutors quickly moved to extradite the 31-year-old from his penthouse in the Bahamas, alleging a scheme to defraud investors. He was arrested soon after at the $30 million apartment — just one of a number of properties his company had bought on the island, including a $16 million vacation home for his parents. A spokesperson for Bankman and Fried told Reuters that the two were attempting to return the deed to FTX.

Bankman and Fried, popular SLS professors who have taught at the school for decades, have been publicly supporting their son’s efforts to fight charges of conspiracy, fraud and campaign finance violations. Their involvement in the case goes beyond supportive parents.

A recent court filing revealed that an unusual $10 million payment was made by Bankman-Fried to his father in January 2022. “In an email exchange, Bankman-Fried and his father discussed structuring the $10 million gift as a loan from Alameda to Bankman-Fried,” wrote John J. Ray III, a lawyer who has been stewarding the bankruptcy proceedings of FTX since his appointment as CEO in the wake of Bankman-Fried’s resignation. Ray had previously done the same for Enron after its collapse. The filing said that Bankman-Fried had “caused” $10 million to be placed in an FTX account in his name and then immediately transferred the money to his father. Bankman, who has taught on corporations and tax law, then transferred $6.775 million into his personal bank accounts and kept the rest in his FTX account.

But while Bankman-Fried described the money as a loan, debtors of FTX and Alameda Research “have been unable … to identify any promissory note, loan agreement, or other indication that the funds were not simply taken from Alameda by Bankman-Fried to enrich his family.” Forbes and other outlets reported that money from the unexplained transfer to Bankman is being used to fund Bankman-Fried’s legal defense. A spokesperson for Bankman and Fried did not respond to a request for comment. 

Stanford has publicly said very little about the case or Bankman and Fried’s relationship to it, though court filings earlier this year revealed Stanford to be among the list of creditors FTX owed money. Stanford spokespeople did not respond to questions for this article, including one about the extent of Stanford’s financial relationship to FTX. In December, as their son’s multi-billion dollar empire began to unravel, Bankman and Fried shared that they would not be teaching the following quarter. At the time, Fried told The Daily her decision to retire was “long-planned” and that she “hope[d] to” return to teaching, while Bankman declined to comment.

Despite the ongoing legal battle and intense public scrutiny placed on both Bankman-Fried and his parents, The Daily has obtained official communications showing that Bankman has continued to play an active role at the school. Bankman is slated to interview a job candidate in late September, mere weeks before his son’s trial begins, according to an email from the SLS Appointments Committee obtained by The Daily.

Stephanie Ashe, a spokesperson for SLS, declined to answer questions about Bankman’s relationship with the school, writing that the most up to date information could be found on the SLS website. Bankman’s profile continues to list him as the Ralph M. Parsons Professor of Law and Business. Sent further questions, she wrote that “as a matter of policy, Stanford University and the law school do not take positions on the outside activities of our individual faculty members, nor do we discuss personnel issues or other confidential matters.”

Bankman-Fried’s relationship to Stanford goes beyond his parents, of course. One of his lawyers is David Mills, a criminal law professor. His since-revoked bail was guaranteed in part by Stanford affiliates — a fact that was not public until media protests spurred Kaplan to unseal their identities in February. And Caroline Ellison, the CEO of Bankman-Fried’s trading company Alameda Research and a former romantic partner, is a Stanford alum who has now pleaded guilty to fraud, money laundering and conspiracy charges. It was his attempted witness tampering through the release of her personal documents, Kaplan said, that meant Bankman-Fried could no longer remain on house arrest at Stanford and would be taken to jail.

This fraud case is not the only one that has enmeshed Stanford in recent years. Theranos founder Elizabeth Holmes, who dropped out of Stanford to pursue a blood-testing idea she developed at the school, was sentenced to 11 and a half years in prison just months before Bankman-Fried’s unraveling. Several prominent Stanford figures served on the board of Theranos and helped lend it credibility, including the late George Shultz, whose name adorns the Hoover Institution’s newest building. Billionaire venture capitalist Tim Draper ’80 helped Theranos acquire significant funding and was an outspoken defender through at least 2018, three years after fraud was first exposed in the company.

More recently, Stan Cohen, a current professor in the Stanford School of Medicine, paid $29.2 million in damages after a court found he committed “a species of actual fraud and … deceit” in misleading investors for his now-defunct biotech company Nuredis. Cohen also admitted to giving false testimony while under oath. Stanford has repeatedly declined to answer questions about Cohen’s employment or whether he will face any sanctions over the case, which involved intellectual property owned by the University.

The University’s association with these cases has concerned some in the community, and the recent resignation of President Marc Tessier-Lavigne over falsified research that emerged from his lab has not helped either, some Stanford affiliates said. 

“All this has a negative impact on Stanford’s reputation as a leading university,” said a Silicon Valley executive and Stanford donor who requested anonymity to not jeopardize their standing on several alumni committees. Others agree. At a Faculty Senate meeting earlier this year, a senator could be heard telling colleagues, “It’s just so much bad news, every day.”

A previous version of this article incorrectly referred to Andreas Paepcke as a professor. He is a research scientist. The Daily regrets this error.

Theo Baker is the Vol. 263 Spotlight Investigations Editor. A frosh from Washington, D.C., he is the youngest ever recipient of a George Polk Award. Contact [email protected] for encrypted email. Find him on Twitter @tab_delete.

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