(Bloomberg) -- When Sam Bankman-Fried was released on a $250 million personal recognizance bond last month, the founder of the FTX cryptocurrency exchange used his parents’ home to help secure the massive bail package.
What wasn’t spelled out in court documents though is that if Bankman-Fried flees, Stanford Law School will end up embroiled in the government’s efforts to seize the collateral.
That’s because Bankman-Fried’s parents, both of whom are professors at the school, lease the land on which the home stands. Under the terms of the 51-year lease, homes must only be sold back to Stanford or other qualified buyers, such as faculty members, reducing the number of potential purchasers and raising questions about the home’s value.
“If he were to abscond, I would guess the government would have to work with Stanford to sell it,” Richard Serafini, a criminal defense lawyer in Florida who was previously a Justice Department attorney, said of the property. “The possibility of that occurring is probably not great, but should he do so then this would make it a lot more complicated than if it were just his parents’ house on property they owned.”
Bankman-Fried has been living with his law professor parents Joseph Bankman and Barbara Fried under the terms of his bail. They’ve lived in the California bungalow-style house since 1991, property records show. The house, with a separate garage, is on a leafy street that had metal gates added recently. Zillow values the five-bedroom home at just over $4 million.
The parents have the right to use their leasehold interest as collateral for the bond, just as they can encumber their leasehold interest with a mortgage, Stanford said in a statement.
“Neither situation requires approval from the university,” the school said.
Risa Heller, a spokesperson for the parents, didn’t immediately respond to a message seeking comment.
Read More: Bankman-Fried’s Stanford Professor Parents Tangled in FTX Probes
Richard Smith, chief of investment at the analysis firm Finiac, said he doubts Stanford would have any trouble selling the property if it needed to liquidate the asset for the government.
“Mostly what’s happening here is the judge is doing his best to make sure Sam Bankman-Fried shows up by putting his parents’ house on the line,” Smith said. “Potentially leaving your parents destitute does kind of add a little more heft to the value that they’ve put on the line.”
It’s not unusual for there to be a mismatch between the size of the a bond and the assets pledged to secure it, which are often around 10% of the stated figure. In approving the package, the judge handling the case said the risk that Bankman-Fried would flee was small and said he presented no danger to the public in terms of future financial crimes.
The process for selling homes on Stanford property is spelled out in detail in a university document that says contracts for such properties “generally obviates the need for and the cost of a licensed real estate professional.” Final offers must be made on Stanford purchase contract, it says.
The university also offers to help to “open an escrow with a local title company that has experience with Stanford transactions,” according to the document.
“Our office will help to facilitate the selling process, but you will be responsible for completing the requirements. We will provide all of the forms and as much of the information as we can to assist you.”
(Updates to length of the lease in third paragraph. An earlier version corrected the spelling of Stanford in headline.)
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