• Sam Bankman-Fried was released from federal court on Thursday after posting a gargantuan, unprecedented „$250 million bond“.
• The „$250 million bond“ was actually no cash at all – the only collateral pledged was his parents’ Palo Alto home, worth $4 million.
• The $250 million figure was not based on cash or collateral, but instead was a „risk assessment“ calculation by the court.
Sam Bankman-Fried, an internationally renowned entrepreneur and investor, walked out of federal court on Thursday a free man. His release was made possible by a gargantuan, unprecedented „$250 million bond“ – an astronomical figure that made headlines all around the globe.
In court, Assistant U.S. Attorney Nicholas Roos described the figure as the „largest ever“ pretrial bond. But, as it turns out, there is less than meets the eye in this „$250 million bond.“ In fact, there is a lot less.
The typical federal case requires a bail bondsman to charge between 10%-15% of the amount in cash to issue a surety bond or „bail bond.“ In the case of Bankman-Fried’s astronomical bond, 15% of $250 million would be $37.5 million. But Bankman-Fried did not pay that amount in cash – he paid nothing. Zero.
Alternatively, a defendant, or someone on their behalf, may pledge collateral in the full amount of the bond. In Bankman-Fried’s case, that would have meant a benefactor having to step up and pledge property worth $250 million. But that did not happen. Instead, Bankman-Fried’s parents promised to pledge as collateral their Palo Alto, California, home, which is rumored to be worth $4 million. And that is the full extent of the collateral pledged to guarantee the $250 million bond.
So where did that $250 million figure come from? It was not based on cash or collateral, but instead was a „risk assessment“ calculation by the court. The court determined the risk posed by Bankman-Fried and set the bond amount accordingly.
Fortunately for Bankman-Fried, his parents were able to come to the rescue and pledge their home as collateral. He is now out of jail and on house arrest, living under the roof of the Palo Alto home. He will remain there as his case makes its way through the court system.