FTX CEO Confirms He’s Investigating Bankman-Fried’s Politically Connected Progressive Parents
Testifying before the House Financial Services Committee Tuesday morning, the newly appointed CEO of FTX revealed that he is investigating the role that disgraced founder Sam Bankman-Fried’s parents played in the cryptocurrency exchange’s recent implosion.
CEO John Ray was asked by Republican Representative Bill Huizenga whether Bankman-Fried’s parents, both of whom are professors at Stanford Law School, had advised their son or been employed by his firm in any capacity.
“We indicated that Mr. Bankman had given legal advice. He received payments…the family certainly received payments,” Ray testified, adding that “we’re investigating” the role the pair played in the fraudulent business.
The congressman noted that when Bankman-Fried met with him in Washington, D.C., on December 8 of last year, he was 15 minutes late and was accompanied by his father, who teaches a course on tax law at Stanford. Bankman-Fried’s mother Barbara, meanwhile, cultivated extensive progressive political connections through her Democratic PAC Mind the Gap, which routed millions of dollars from Silicon Valley donors to Democratic campaigns, pledging to spend as much as $140 million in the 2020 election cycle.
The group reportedly attracted wealthy donors by pledging to use statistical modeling to effectively leverage their contributions to elect the maximum number of candidates, an approach one donor called “the moneyball of politics,” according to an expose in Vox. Major donors include Facebook co-founder Dustin Moskovitz, former Google CEO Eric Schmidt, and a host of other Silicon Valley heavy-hitters, including Human Rights Watch co-chairwoman Amy Rao.
Bankman-Fried is largely believed to have used his mother’s political connections — and those he cultivated himself through his own PAC — to enlist support for his crypto lobbying campaign in Washington, D.C. During Tuesday’s hearing, several Republican lawmakers expressed alarm at the degree of influence Bankman-Fried was able to attain in D.C. in just a few short years of lobbying work, which focused on ensuring that the crypto industry would be regulated in a way that benefitted his firm.
Barbara Bankman-Fried has since stepped down from her leadership role at Mind the Gap as she and her husband brace for the legal fallout their family is facing, which they expect will decimate their finances, sources close to the family told the Wall Street Journal.
While at Stanford, the pair were often immersed in a campus culture of philosophical and ethics debates, Puck News reported, making it an ironic twist of fate that their child is now embroiled in a fraud debacle of epic proportions.
When the so-called whiz kid pushed back against pressure to step down from the company weeks ago, FTX’s lawyers reportedly went to the senior Bankman for recourse, the New York Post noted. Bankman-Fried resigned and FTX filed for bankruptcy on November 11.
Ray was called to speak to the chamber in lieu of the fallen tech whiz, who was camping out in the Bahamas until he was arrested there Monday at the request of the U.S. government. Bankman-Fried is now expected to be extradited to the U.S. His parents have been staying in the country with him for weeks while litigation mounts.
The Royal Bahamas Police Force took failed financial entrepreneur into custody after the U.S. filed criminal charges against him, according to a press statement. FTX collapsed in November, costing investors millions of dollars in losses. Bankman-Fried has been accused of misusing customer funds deposited with FTX to boost another one of his enterprises: a crypto hedge fund, Alameda Research, which he operated simultaneously while seemingly evading financial ethics scrutiny. Ray seemed to confirm to Republican Representative Andy Barr on Tuesday that FTX commingled funds with Alameda.
With the crumbling of FTX, Bankman-Fried’s multi-million dollar net worth evaporated almost overnight to less than $100,000, he claimed last month. The thirty-year-old has been slapped with an expensive class-action lawsuit leveled by FTX investors. The plaintiffs alleged that the company was a “house of cards, a Ponzi scheme where the FTX entities shuffled customer funds between their opaque affiliated entities,” according to CoinDesk.
The parties claiming damages also targeted FTX brand ambassadors such as National Football League quarterback Tom Brady, comedian Larry David, and tennis player Naomi Osaka, who they say fueled artificial hype around FTX and likely violated state and federal anti-touting laws.