Greetings, listeners. Serious Trouble will return in podcast form in January, but we thought the surprising news that Sam Bankman-Fried was released on bail shortly after he agreed to be extradited back to the United States deserved a swift lawsplainer.

How, you may ask, does a dude who is so clearly impervious to reality, who had to be arrested in the Bahamas, and who is accused of billions of dollars in fraud, get out on bail? Fair question.

The presumption for pretrial release in federal cases

Start with this: in federal criminal cases, bail is governed by the Bail Reform Act of 1984. That scheme starts out with a presumption that a person should be released on their own recognizance or on an unsecured appearance bond — that is, a promise to pay a certain amount of money if they fail to show up for court. The magistrate judge may only deviate from that presumption if he or she “determines that such release will not reasonably assure the appearance of the person as required or will endanger the safety of any other person or the community.” The magistrate judge may only detain the defendant pretrial if he or she finds that “no condition or combination of conditions will reasonably assure the appearance of the person as required and the safety of any other person and the community.”

In other words, in the federal system you start out with the presumption that you’ll be released on a mere promise to appear, and the magistrate judge adds more conditions or restrictions to the extent they think it’s necessary to make you appear for trial and prevent you from being a danger. For some crimes there’s a rebuttable presumption that you’re a flight risk and a danger — mostly drug crimes, violent crimes, and sex crimes, but not (as one might expect) white collar crimes involving vast amounts of money.

So what happened with Sam Bankman-Fried?

Bankman-Fried’s bail terms are very good, all things considered

On December 22, at his first appearance in the United States, the magistrate judge released Bankman-Fried on bail terms agreed to by the prosecution and the defense. You can read those terms in two documents. First is the minute order (basically a clerk’s description of what happened) of the hearing:

Bankman Fried Order

47.3KB ∙ PDF File

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Next is the bond itself, which spells out the terms:

Appearance Bond Bankman Fried

392KB ∙ PDF File

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What are the terms? They include:

He’s on home detention at his parents’ house with an ankle monitor.
He’s under “intensive” pretrial supervision, which means Pretrial Services — sort of like a probation office for people before trial — will be watching him very carefully and checking in frequently. They’ll also determine when he’s allowed to leave his parents’ home (usually for medical appointments, church, lawyer visits, and work if he’s employed).
He’s had to surrender his passport and can’t go anywhere other than the Northern District of California (where he’ll live with his parents) and the Southern District of New York (where he’ll go on trial).
He can’t open a business or engage in financial transactions over $1,000 or open lines of credit without government approval.

But what about the money? The headlines all said he was released on a $250 million bond. That’s a lot, right?

Yes, it certainly is. But most of that is not secured — it’s just a promise to pay it if he flees or breaks the terms of release. That distinguishes it from bonds that must be posted as cash, or which must be “fully justified,” that is fully backed by real property or other assets. The financial terms are:

The total bond amount — the amount he promises to pay if he breaks the terms of release — is $250 million.
His parents co-signed the bond, meaning they are on the hook for that amount (which they can’t pay, obviously) if he breaks the terms of the bond.
Two non-parent sureties have to sign the bond, pledging amounts approved by the government, by January 5. That means Bankman-Fried must find two non-parent supporters with substantial assets to agree to sign off on the bond and be responsible for up to a specified amount (likely in the hundreds of thousands) if he breaks the terms of the bond.
His parents must post the equity in their home by January 12. That means they have to file with the court and record documents entitling the government to the equity in their home if he breaks the bond conditions. Given the home, which they bought in 1991 and is in Palo Alto, that’s likely millions of dollars in equity.

Notably, the magistrate judge allowed Bankman-Fried to be released upon him and his parents signing the bond and him being fitted with an ankle bracelet.

Is that an awfully good deal for Bankman-Fried? Yes. For someone accused of a historically huge multi-billion-dollar fraud, who had to be extradited to the U.S., who likely has access to resources that could help him flee, it’s an extremely good deal, especially the part that allowed him to be released immediately before his parents posted the property or he got two more sureties.

I’m more than a little surprised the government agreed to it. They may have thought that the magistrate judge would likely give a white-collar criminal with no record and parents willing to house him a bond no matter what they argued, and decided to agree to have more control over the precise terms. They may also be very confident they can devote resources to keep him from fleeing. His ex-girlfriend and his co-founder have already cooperated and pleaded guilty and they’re likely feeling more than a little smug about their case. They may think that if they keep him out on bond, even on very strict conditions, he’s likely to keep making their case easier by making stupid self-incriminating statements. Or maybe they just think that if he flees they can catch him and then they get to take a house away from two Stanford Law professors, which they would enjoy.

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Is the magistrate judge wrong? No. Remember, the question is “would any combination of conditions assure this person appears at trial and isn’t a danger to the community?” FTX is in new hands, Bankman-Fried has no control over it, and these conditions should prevent new scams so it’s very plausible to think he won’t be a danger to the community. The home detention and ankle monitor and intensive supervision and prospect of completely bankrupting his parents and taking their home plausibly means he’ll appear at trial. Personally, he strikes me as a man-child sociopath unlikely to be deterred by the complete destruction of his family, but that’s not the only possible view.

The bottom line is that this result may shock people, but it is consistent with federal bail law. That’s likely why the government agreed and not — as conspiracy theorists are already shouting — because of some political pressure in his favor.

The federal bail system’s presumption of release makes it better and more humane than most state systems. But you can still see the impact of wealth. First, because Sam Bankman-Fried broke the law by (allegedly) stealing billions of dollars instead of by being paid a hundred bucks to transport half a key of black tar heroin, there was no presumption he should be detained. That reflects society’s values. Moreover, rich people are more easily able to satisfy elaborate bail conditions. They have stable families in whose homes they can live, their families can post substantial home equity, they can afford the cost of home monitoring, they can afford to travel back and forth from home to court, they have rich friends who will sign bonds pledging money. Poor people don’t have those things, and so the magistrate judge finds that no combination of conditions — that is, no combination of conditions that this defendant can meet — will assure they won’t be a flight risk or a danger.

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Another point: Sam Bankman-Fried is going to have a very hard time defending this case because of all of the very stupid public statements he’s made incriminating himself and because two of his closest confederates are cooperating against him. But it would be functionally impossible for him to defend a highly complex, computer-intensive, document-intensive case from custody. Preparing a defense in a white collar case involves going through thousands of documents and emails, which is extraordinarily hard to do when the defendant is incarcerated.

So: is the bail surprising? Yes. Is it a travesty of justice? That’s a philosophical question. Is it legally wrong, or outside the scope of what can or should happen under the federal bail system? No.

See you all in the new year.

Ken

An earlier version of this post incorrectly stated the date by which Bankman-Fried’s parents must post equity interest in their home — the conditions say they must do so by January 12, not January 5.

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