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James A. Murphy, a securities lawyer and legal writer, was the founder and chairman of law firm Murphy & McGonigle.

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Sam Bankman-Fried walked out of federal court on Thursday essentially a free man.

News outlets all around the globe reported that Bankman-Fried got out of jail by posting a gargantuan, unprecedented “$250 million bond.” In court, Assistant U.S. Attorney Nicholas Roos described it 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, a lot less.

James A. Murphy was the founder and chairman of law firm Murphy & McGonigle.

In the typical federal case, a bail bondsman would 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 $37.5 million for his bond. No, Bankman-Fried actually paid no cash at all for his “$250 million bond.” Nothing. Zero.

There is a second way to acquire a bail bond. A defendant, or someone on their behalf, may pledge collateral in the full amount of the bond. Then, if the defendant fails to appear in court, the pledged collateral is forfeit to the court. So, in Bankman-Fried’s case, that would mean he would need a benefactor to step up and pledge property worth $250 million to get the bond. But that did not happen either.

Instead, Bankman-Fried’s parents promised to pledge as collateral their Palo Alto, California, home, where he'll also be staying under house arrest. The Palo Alto home is rumored to be worth $4 million. And that is the full extent of the collateral pledged to guarantee the $250 million bond. No other collateral was posted or promised.

So where did that $250 million figure come from? Great question.

In this case, Bankman-Fried was not required to post a conventional bail bond. Instead, Bankman-Fried was simply released from custody on something called a personal recognizance bond. The personal recognizance bond contains Bankman-Fried’s solemn promise (and his parents’ promise) to pay the court $250 million if he fails to show up for trial at the appointed time.

Yes, you read that right. Bankman-Fried walked out of court essentially a free man by signing a piece of paper where he promised to pay the court $250 million if he decides to flee to another country with no extradition. This, of course, is totally absurd.

The attempt by the prosecutor’s office to sell this as some extraordinarily onerous bail condition would be laughable. Except the millions of customers who Bankman-Fried defrauded aren’t laughing.

Who could have imagined that the Bahamas would have stricter bail laws for financial fraud than the United States?

UPDATE (Dec. 23, 2022 19:35 UTC): Adds context in the sixth and ninth paragraphs.

CORRECTION (DEC. 23, 2022 19:35 UTC): Changes the first sentence to show he is free thanks to a bond.








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James A. Murphy, a securities lawyer and legal writer, was the founder and chairman of law firm Murphy & McGonigle.

James A. Murphy, a securities lawyer and legal writer, was the founder and chairman of law firm Murphy & McGonigle.