One story line we’ll be following, of course, is the saga of Sam Bankman-Fried and FTX. The fallen crypto mogul is scheduled to be in court in New York on Tuesday, where he is expected to plead not guilty. We’ll bring you all the behind-the-scenes details in Wednesday’s newsletter.
But one question that came up over the holidays — perhaps even at your own gathering — was: Why was Mr. Bankman-Fried granted bail, allowing him to stay out of prison and live at his parents’ home, before his trial? It was especially puzzling because his bail was set at $250 million, and he had told me at the DealBook Summit that he had only $100,000 to his name.
Over the break, I spoke with many involved in Mr. Bankman-Fried’s extradition from the Bahamas to the United States and with his bail arrangement. It’s a fascinating story of deal-making and negotiation, driven in large part by public perception.
First, it’s worth explaining how bail actually works. When a judge sets bail, the accused doesn’t have to put up that entire amount to stay out of prison. The figure is instead what the accused would have to pay if he or she doesn’t show up for court. Typically, the defendant posts bond, which is about 10 percent of bail — though that’s not a hard-and-fast rule. Bond could also be provided as collateral or as cash and can be posted by others, including friends or a bail bond agent.
For prosecutors, bail is meant to be a strong disincentive to flee, not to make a statement about justice. In fact, the legal system would prefer defendants who aren’t a danger to others to stay out of prison, reducing costs. (The annual cost of detaining an inmate in New York City, for example, is over $500,000.)
Mr. Bankman-Fried had another point of leverage: U.S. prosecutors had wanted to extradite him from the Bahamas quickly, to avoid both the perception of slow-moving justice and his getting hurt in a Bahamian jail before being moved to the U.S. If he had fought extradition, he would most likely have lost that fight, but it would have cost the U.S. time and money. In return, he wanted to stay out of prison before trial.
The Justice Department and Mr. Bankman-Fried’s lawyers ultimately negotiated over how to extradite him in exchange for letting him stay out of prison without posting a huge bond, given his lack of funds. So while prosecutors could herald a $250 million bail, one of the highest in history, he was ultimately released on something closer to his own recognizance, which is also a standard arrangement. Prosecutors did demand that his parents post their home as collateral and co-sign the bail deal, expecting that Mr. Bankman-Fried wouldn’t want to hurt his family.