Unchained is pleased to announce that David Z. Morris will be writing a regular column twice weekly at Unchained, starting with some pieces analyzing the run-up to the trial of Sam Bankman-Fried. Morris has been writing about cryptocurrency since 2013 for outlets including Fortune, the Atlantic, and, most recently, as Chief Columnist at CoinDesk. He publishes the biweekly finance and technology newsletter Flesh/Markets.


A new lawsuit claims that Joseph Bankman and Barbara Fried, parents of Sam Bankman-Fried, were far more enmeshed in alleged fraud at the FTX cryptocurrency exchange than was previously understood. The picture of self-dealing, knowing deception, and haphazard fund management makes Bankman-Fried’s relationship with his parents look just as conflicted and troubling as the notorious polycule arrangement among the exchange’s young executives.

The lawsuit was filed by administrators of the bankrupt FTX crypto exchange on Monday, September 18. The suit’s main allegation is that Bankman and Fried had major influence over their son Sam Bankman-Fried in managing funds at FTX, and used that influence to enrich themselves and direct money for other self-dealing purposes. The suit claims the ultimate source of those funds was by and large user deposits and seeks primarily to “claw back” the money.

Sam Bankman-Fried is set to stand trial in two weeks as the principal architect of the FTX fraud. At the heart of that criminal case is the misuse of billions of dollars of depositor funds. The new suit lays out reams of evidence that suggest Bankman-Fried’s parents frequently played active roles in dispersing those funds to themselves and their professional affiliates.

But the claims made in the new suit against Bankman and Fried place them far closer to alleged criminal fraud than many onlookers previously understood. Among the suit’s many claims are that Barbara Fried “pressured” FTX executives into committing what would amount to campaign finance violations and that Joseph Bankman improperly funneled $5.5 million dollars worth of FTX money to Stanford, his employer.

“Bankman and Fried deployed their decades of experience as sophisticated law professors and veneer of legitimacy, not to help the FTX Group,” the suit summarizes, “but rather to plunder it in order to enrich themselves and their pet causes.”

In a statement to CoinDesk, Bankman and Fried’s lawyers denied the allegations and described the suit as a “dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins.”

“These claims are completely false,” they said. “[John J. Ray III, FTX’s bankruptcy-era CEO] and his massive team of lawyers, who are collectively running up countless millions of dollars in fees while returning relatively little to FTX clients, know better.”

However, the new filing contains mountains of seemingly damning evidence, including extensive emails and other communications that show both Bankman and Fried appearing to encourage – and even actively organize – fraudulent activity at their son’s company.

That includes extensive communication about how to structure and deliver a $10 million gift to Bankman and Fried. That huge sum, which the suit characterizes as fundamentally fraudulent, was already public knowledge. So was a $16 million house, paid for by FTX but occupied by Bankman-Fried’s parents and treated as their property.

The new suit adds stomach-turning details about these and other acts. The picture that emerges is one of Bankman and Fried’s knowing complicity in the “family business” – a phrase that, according to the suit, Joseph Bankman used to describe Alameda Research and the FTX Group as early as 2018.

Father Figures

While Barbara Fried’s actions as alleged in the new suit are corrupt, Joseph Bankman is portrayed not just as a participant in the larger scheme, but also as one of its architects. 

“[Joseph] Bankman’s access and authority within FTX Trading, Alameda, Alameda Ltd., and FTX US [collectively the FTX Group] gave him de facto officer, director, and/or manager status at each,” according to the filing.

Moreover, the suit characterizes Bankman as uniquely responsible for what was going on at FTX because of his experience and expertise. “Bankman was virtually the only grown-up in the room, guiding the FTX Group and other executives, many of whom were recent college graduates in their mid-20s and had never before run a company”

The most damning claims against Bankman involve his role in directing millions of dollars in donations, salary, investment, or other funding to friends, family, and allies, rather than allocating funds with the best interest of FTX in mind. While the suit lays this out as a failure of fiduciary responsibility – a civil charge – the allegations frequently seem to skirt the line of criminality.

Those hints of criminality surface at the very beginning of Bankman’s involvement with the FTX saga. The suit recounts that in early 2018, Bankman helped select accounting services for FTX group, and helped his son find legal counsel. According to the suit, Bankman “advocated for hiring [Dan] Friedberg, a partner at Law Firm-1 at the time, as the effective general counsel of the FTX Group.”

Bankman’s role in selecting Friedberg is particularly notable for one simple reason: Friedberg had been previously involved in offshore embezzlement and fraud.

Specifically, Friedberg in the late 2000s was in a legal role at UltimateBet, an online poker site. The site was later discovered to have used a “god mode” to cheat customers. Though he was never charged with a crime, according to Poker.org, Friedberg appeared to have been caught on tape proposing a coverup.

This casts a striking light on Joseph Bankman’s statement in March 2021 that “I interviewed lots of firms for my son’s company and chose [Friedberg and Law Firm-1]. And let me tell you, I felt I had a lot riding on that decision[.]” 

Other aspects of Bankman’s requests for legal advice seem troubling in retrospect. In November 2021, for instance, the suit has Joseph Bankman asking Friedberg’s team “how assets including primary residence can be structured to be bankruptcy-remote.” Bankman specifically suggested placing FTX assets in real estate and attached a link with information about offshore asset protection in the Bahamas. 

Bankman was also aware, according to the suit, of the now-notorious huge loans to executives that Barbara Fried had pushed for to mask political donations. According to the suit, “in September 2022, Bankman [said] that ‘Alameda has distributed a lot of money … used to make political donations,’ and that [he] had ‘talked about categorizing these as loans.’”

Bankman similarly enriched his friends at Stanford, directing more than $5.5 million in donations from FTX Group to the university (hours after the suit appeared, Stanford announced it would return the gifts). These donations, the suit argues, “amounted to naked self-dealing by Bankman, who sought to curry favor with and enrich his employer at the FTX Group’s expense.” Bankman appeared to very closely direct the movement of money between FTX-affiliated entities to fund these huge donations – which in many cases, according to the suit, came from sources known to include user funds.

Bankman also, seemingly without corporate oversight, used FTX funds to gift “a free trip to France” to a former Stanford Law School student who later became outside counsel to the FTX Group. The trip included airline tickets and tickets to the Formula 1 Grand Prix in France costing several thousand dollars.

But the most shocking allegation in the suit may be its account of a monetary demand Joseph Bankman made for his own direct benefit.

In December of 2021, the suit says Bankman took a leave of absence from Stanford to focus on FTX. He signed an employment contract for a $200,000 per year salary, with possible bonuses.

But it appears that was not enough for Bankman. On January 12, 2022, the suit says, “Bankman complained to FTX US Head of Administration that he was receiving gross pay of only $16,667 per month from FTX US, when he was ‘supposed to be getting $1M/yr.’”

Incredibly, Bankman then leaned on his son in an email. “Gee, Sam I don’t know what to say here,” he wrote. “This is the first [I] have heard of the 200K a year salary! Putting Barbara on this.”

“In other words,” the suit summarizes, “Bankman lobbied his son to massively increase his own salary.” 

Maternal Instincts

Barbara Fried appears less enmeshed in the alleged FTX fraud than Joseph Bankman, but the suit nonetheless presents evidence of her alleged close involvement in serious wrongdoing.

Most damningly, the suit claims that Fried actively encouraged the use of straw donors to conceal the flow of FTX’s political donations – a serious crime for which FTX execs Ryan Salame and Nishad Singh have both faced legal fallout. The suit quotes emails and messages from Fried that served to “pressure certain FTX Insiders to unlawfully avoid (if not violate) federal campaign finance law.”

This was notably self-interested: she feared transparent donations would, in her words, “’create the impression that funding [her Mind the Gap PAC] is a family affair”. That pressure seemingly led directly to campaign finance fraud charges initially filed against her son. The campaign finance charges were later withdrawn, though prosecutors have said they will be pursued during the case in some form.

According to the filing, Barbara Fried also seems to have knowingly participated in using FTX funds to furnish the Bahamian house, which was treated and referred to as belonging to Bankman and Fried.

“Less than one month after closing on Blue Water,” the suit reads, “Fried instructed FTX DM employees to place online orders, including for a sofa, at least eight vases, and five rugs, one of which was a Persian hand-knotted rug costing more than $2,500, to furnish their Bahamian residence. The furnishings were purchased with either an FTX DM corporate credit card or the personal credit card of an FTX DM employee who was reimbursed using funds that belonged to FTX Trading.”

FTX also paid for cleaning and maintenance services on the house. One message about landscaping suggests landscapers should “bill FTX directly.”

Fried and Bankman also, in emails and messages cited in the suit, repeatedly refer to Blue Water as “our” house, not FTX’s. In one message that appears to acknowledge the alleged scheme, “[Joseph] Bankman emailed the co-CEO of FTX DM Ryan Salame (“Salame”) and others, stating: ‘We are hoping you can all come to celebrate the house you helped us buy/move into . . . For those who haven’t been here, go to the Old Fort Bay Gate House on Bay Street . . .”

The new filing also claims that the total cost of the house – not $16 million, but nearly $19 million including taxes and the like – was paid for by an FTX DM account that included customer funds.

Family Matters

The suit does not comment on the implicitly bizarre family dynamics of a father calling on a mother for backup in demanding $800,000 from their son. But the tactic does seem to have gotten Bankman and Fried what they wanted – and then some. While Bankman doesn’t appear to have gotten his immense salary request fulfilled, this was more than made up for by a $10 million “gift” funneled to the parents shortly thereafter.

The suit suggests that both Joseph Bankman and Barabara Fried closely arranged the structure and funding of this supposed gift, with the alleged goal of avoiding taxes. It was Joseph Bankman, according to the suit, who suggested that the “gift” be paid out of a $250 million “loan” from Alameda Limited, FTX’s sister firm, to son Sam Bankman-Fried. The suit alleges that “there is no indication that Bankman-Fried intended to repay the so-called loan.” That $10 million is reportedly being used to pay for Sam Bankman-Fried’s criminal defense.

The final moment of this exchange opens a window into the profound failings of character and moral ambiguity that appear to have fueled the FTX fiasco. After arranging for the allegedly corrupt transfer of $10 million of what amounted to FTX depositor funds to themselves, Bankman sent their son a heartfelt thanks for the embezzled riches:

“We are so touched by this gift,” he wrote. “Mom is announcing retirement, which she would not have done otherwise.”