Why This Former SEC Lawyer Wants Charges Brought Against Sam Bankman-Fried’s Parents

In a recent development, former SEC Attorney John Reed Stark commented on Sam Bankman-Fried’s (SBF) parents‘ alleged involvement in their son’s illicit activities and whether or not charges should be brought against them.

What Reed Has To Say About SBF’s Parents

In a tweet shared on his X (formerly Twitter) platform, Stark stated that it feels unusual that the US Department of Justice (DOJ) and the Securities and Exchange Commission (SEC) haven’t added Sam Bankman-Fried’s parents as defendants in their son’s case. 

The former SEC attorney mentioned how he served in the Commission for almost 20 years and “led dozens of SEC prosecutions,” suggesting that if it were to be like before, the SEC would have acted and brought an action against Allan Bankman and Barbara Fried. For one, he said that the SEC could at least name them as “relief defendants.”

A relief defendant is one who has received ill-gotten proceeds from the misconduct of another person. It is believed that SBF’s parents (even if not involved in their son’s alleged criminal acts) had received certain funds due to the misappropriation of customers’ funds that went on at the crypto exchange FTX. 

In its lawsuit against Sam Bankman-Fried’s parents, FTX accused Bankman and Fried of discussing with their son to transfer “$10 million in cash gift and a $16.4 luxury property” in the Bahamas despite “knowing or blatantly ignoring” that the FTX Group was insolvent or on the brink of insolvency. The duo was also accused of being behind the charitable contributions to certain organizations, including Stanford University, where they work.

Sam Bankman-Fried: The DOJ Not Doing Enough

Aside from instituting a criminal action against SBF’s parents, Stark has labeled the “extraordinary dearth of US DOJ crypto-related criminal prosecutions” as extremely surprising. He made this statement in relation to the fact that there are “close to 200 crypto-related SEC enforcement actions.”

He likely believes that some of these SEC’s actions have underlying criminal ingredients, so the DOJ should institute criminal prosecutions on its end. He suggested that the DOJ’s inefficiency is why people in the industry are taking the SEC’s actions with levity.

He pointed out how Tyler Winklevoss called the SEC allegations against his crypto exchange Gemini “super lame” and likened it to “manufactured parking tickets.” Meanwhile, crypto exchanges Binance and Coinbase have “touted their SEC charges like badges of honor,” according to Stark.

He mentioned that the SEC is limited in its ability as it is “merely a civil enforcement agency.” Therefore, the DOJ needs to “wake up” as it is only then that these “crypto-grifters” will be more inclined to do the right thing, knowing that they face the “threat of DOJ prosecution” such as prison time and not just the SEC’s “enforcement-related risks” like “injunctions, penalties, and disgorgement.”