Sam Bankman-Fried (SBF) has been released on a US$250 million bond package while he awaits trial over the collapse of the FTX crypto exchange. Crypto Twitter erupted in outrage at the fact that Sam Bankman-Fried somehow had access to a spare US$250 million despite claiming to only have around US$100,000 left in the bank a few weeks ago.
The bond was granted to the failed crypto founder on the condition of a US$250 million bond, home detention, location monitoring and the surrender of his passport. SBF will live with his parents in Palo Alto, California, who secured his bond package with the equity from their house. The bond package was also paid for by one non-family member according to the court proceedings.
Ryan Sean Adams, the co-host of the popular crypto podcast Bankless was one such commentator, typing in all caps: ‘WHERE DID SBF GET 250 MILLION DOLLARS’?
The satirical financial Twitter accounts ‘Not Jerome Powell’ and ‘Wall Street Silver’ also made comments on the debacle, with both accounts referring to SBF being released on bail.
What these observers failed to notice is that Sam Bankman-Fried was released on a bond package not on bail. What’s the difference you ask?
The difference between bond and bail
Many people often use the words ‘bail’ and ‘bond’ interchangeably which can lead to a lot of confusion because they’re two very different things.
Bail is typically money or property that is paid in the form of a cash deposit. It’s paid directly to the court to ensure that you’ll return and appear for your court date if you’re released. By paying the bail amount, you are using that dollar amount to illustrate that you understand the gravity of the situation and are promising to return to court. If you fail to appear in court, you forfeit that bail amount.
Sometimes, you might not have the financial resources to pay a hefty bail. This is where a bondsman or bonding company comes in. Essentially, they pay the full bail amount on your behalf, but they don’t do this for free. A bondsman usually charges a fee somewhere between 10% and 15% of the total amount. This pledge from a bondsman is called a bond — and it’s what Sam Bankman-Fried has been released on.
We can estimate that Sam Bankman-Fried’s bond payment sits somewhere around the 10% mark, meaning that SBF would have had to have coughed up around US$25 million in cash. This sum reportedly comes from the equity contained in his parent’s Palo Alto home. His parents are both Law Professors at Stanford University, which means they would most likely have some spare cash laying around as well.