Sam Bankman-Fried’s Father Faces Allegations in Democratic Dark Money Network

Joseph Bankman, the father of troubled former crypto entrepreneur Sam Bankman-Fried, is facing allegations regarding his advisory role within a major Democratic dark money network. This information comes to light amidst a lawsuit filed by FTX, a cryptocurrency company formerly associated with Bankman-Fried, accusing his parents of leveraging their connections within FTX for financial gain.

“The allegation appeared in a lawsuit Bankman-Fried’s former company, FTX, filed against his parents Monday after they allegedly ‘exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars.”

the lawsuit stated.

The lawsuit alleges that Joseph Bankman sat on the advisory board of Arabella Advisors, a prominent Washington, D.C.-based consulting firm overseeing a network supporting left-wing groups. Arabella Advisors manages funds like the New Venture Fund, Sixteen Thirty Fund, Windward Fund, and Hopewell Fund, collectively raising over a billion dollars in anonymous cash annually and supporting liberal causes and initiatives nationwide.

“You can tell a lot about someone by the company they keep, so it’s truly not surprising to learn about the ties between the Arabella Advisors network and the Sam Bankman-Fried scandal. This arrangement deserves serious scrutiny, especially the extent to which SBF tried to leverage his political influence through the most powerful liberal dark money network in America.”

said Caitlin Sutherland, the executive director of Americans for Public Trust.

Not Only That

The lawsuit, filed in Delaware bankruptcy court, asserts that Bankman and Fried exploited their influence within the FTX enterprise to enrich themselves, knowingly at the expense of the debtors. Notably, they received a substantial $10 million cash gift from their son, along with a $16.4 million luxury property in the Bahamas, where FTX was headquartered.

Furthermore, the court documents reveal that Bankman-Fried’s parents advocated for significant political and charitable contributions, including a $4 million donation from FTX’s sister hedge fund, Alameda Research. These contributions were allegedly intended to boost their social and professional status at the expense of FTX Group.

FTX’s debtors, led by John J. Ray III, seek to recover these financial losses. The exact damages to be paid will be determined in a subsequent trial. The lawsuit also raises the possibility of selling Bankman and Fried’s Bahamas home, known as “Blue Water,” which was paid for by FTX debtors.

Clash of Claims: Advisory Role or Mistake?

While the lawsuit from FTX alleges Joseph Bankman’s advisory role at Arabella Advisors, the firm denies any involvement by Bankman. The FTX attorneys handling the lawsuit might have mistakenly included this claim, and court documents reveal that FTX had wired funds to the Arabella-managed New Venture Fund. A spokesperson clarified that Bankman’s position was with a project affiliated with the company but operating independently.

“In early 2022, NVF issued grants from a project advised by Mr. Bankman and affiliated with the FTX Foundation, all of which went to vet charitable organizations addressing environmental challenges and hunger carefully,”

the spokesperson explained.

Parker Thayer, an investigative researcher at the Capitol Research Center, criticized the fund’s promise to return funds from FTX, considering it inadequate and a hit to their credibility amidst other ongoing lawsuits alleging discrimination and retaliation.

“The allegations in the lawsuit against Sam Bankman Fried’s parents of reaping millions of dollars from their son’s bankrupt cryptocurrency business and funneling dark money to liberal causes through Arabella suggests that both of them — law professors at Stanford University — may be guilty of conspiracy, banking, and election law crimes,”

said Paul Kamenar, counsel to the National Legal and Policy Center.

Alameda Research Implicated in 2021 Bitcoin Price Plunge

The abrupt and dramatic 87% drop in Bitcoin’s price on October 21, 2021, might have been caused by trading errors within Sam Bankman-Fried’s Alameda Research.

The incident unfolded at 11:34 UTC (7:34 a.m. ET) when Bitcoin prices plummeted from around $65,760 to a staggering low of $8,200 on Binance US. This flash crash shocked the cryptocurrency community; however, Bitcoin quickly rebounded, nearly reaching its initial value.

Initially, Binance.US attributed the event to an “institutional trader” and a glitch in their trading systems. The true nature of this trader remained undisclosed until a former Alameda Research employee, Baradwaj, came forward with crucial information.

Baradwaj revealed that Alameda Research, known for utilizing algorithms for trade executions, allows manual order placements during market volatility or lucrative opportunities. In this case, a manual order went awry due to a misplaced decimal point, causing a significant BTC sell-off at a fraction of its market value.

The consequences for Alameda Research were substantial, resulting in losses estimated at tens of millions of dollars. Opportunistic arbitrage traders quickly seized on the pricing error, restoring Bitcoin’s price levels. Baradwaj emphasized the magnitude of Alameda’s losses, stating they were “staggering.”

The Broader Implications and Legal Ramifications

The revelations regarding Alameda Research’s alleged involvement in the significant Bitcoin price plunge in 2021 raise critical legal implications for Sam Bankman-Fried and his family. If the claims hold and Alameda Research is responsible for the trading error, serious consequences are likely.

For Sam Bankman-Fried, the founder of Alameda Research, potential legal repercussions could range from regulatory penalties and fines to civil lawsuits from affected traders and investors. Securities regulators may scrutinize the incident, potentially leading to sanctions if they find violations of trading practices or market manipulation. Moreover, the incident might invite lawsuits from those who suffered financial losses due to the sudden price drop.

The legal outlook is also grim regarding Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried, who are implicated in the lawsuit by FTX alleging fraudulently transferred funds. They could face severe financial penalties and the possibility of losing assets acquired through suspected fraud if proven guilty.

The court may also order them to repay the amounts, including the cash gift and the luxury property. Some even suggested that If convicted on all charges relating to securities fraud and conspiracy fraud counts, the 31-year-old faces up to 155 years behind bars.

NB: Any Information provided is NOT FINANCIAL ADVICE. Do Your Research before making any Financial Decisions.