Stanford University will return millions of dollars in “gifts” that it received from collapsed crypto exchange FTX at the behest of FTX founder Sam Bankman-Fried’s parents.
The school was offered gifts from the collapsed crypto exchange via the FTX Foundation and FTX-related companies "largely for pandemic-related prevention and research," a spokesperson for the institution told Fortune.
They added that the university has been "in discussions with attorneys for the FTX debtors to recover these gifts, and will be returning the funds in their entirety."
The announcement follows a lawsuit filed on Monday by the FTX Bankruptcy Estate against Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried.
The pair, both professors at Stanford Law School, are accused of leveraging their influential roles within the FTX enterprise for personal gain, and channeling millions of dollars to various entities, family, and friends.
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The bankruptcy estate of FTX has taken legal action against Joseph Bankman and Barbara Fried, the parents of the collapsed crypto exchange's founder Sam Bankman-Fried, aiming to recover "millions of dollars in fraudulently transferred and misappropriated funds" allegedly taken by the couple. Referring to the defendants as Bankman and Fried, respectively, the debtors of FTX and its affiliated entity, Alameda Research, are also seeking to recover damages attributed to breaches of fiduciary duties...
The lawsuit specifically alleges that Joseph Bankman directed more than $5.5 million from FTX Group to his employer, Stanford University, from November 2021 to May 2022.
These donations, the filing says, “did not benefit the FTX Group, and instead amounted to naked self-dealing by Bankman, who sought to curry favor with and enrich his employer at the FTX Group’s expense”.
“Various creative means” to channel funds
The document details the “various creative means” by which Bankman directed the funds to Stanford University through different FTX Group entities.
For instance, on November 9, 2021, Bankman reportedly inquired with the General Counsel of both Alameda and FTX Trading about Paper Bird's ability to donate $500,000 to Stanford University.
He is said to have mentioned, “We want Paperbird to do this because it can use the deduction."
Subsequent filings suggest a Paper Bird account was then established at Bank-4, receiving deposits totaling $1.5 million from an FTX Trading account. On that same day, a half-million-dollar wire transfer from Paper Bird was made to Stanford.
The filing also references a conversation believed to have taken place in February 2022. During this dialogue, Bankman is reported to have discussed a proposal for a donation of $4 million with an FTX Foundation Project Officer. The intended recipients of this donation were a Stanford University professor and the Stanford School of Medicine's Fund For Pandemic Preparedness.
Bankman described the idea as “pretty much of a no-brainer,” emphasizing the need for a more formal discussion with the Project Officer. He further stated, “We can’t decide – that is against ‘donor’ rules . . . we can give input which, given our potential for the university, is likely to be dispositive.”
Later, this proposed donation was reportedly processed via a Bitcoin transaction from an FTX account.
In March 2022, the filing suggests that Bankman proposed a separate $1.5 million donation to Stanford University, communicating directly with the FTX Foundation’s CEO and Project Officer.
In this context, he wrote, “I propose that we get someone from the Foundation to sign it and then fund it,” indicating his intent to follow the standard approval procedures.
After this, Bankman reportedly discussed a $10,000 sponsorship for the Stanford Blockchain Conference with the General Counsel of both Alameda and FTX Trading.
He suggested sourcing funds from FTX.us instead of the FTX Foundation, noting that “10K is so little it doesn’t really matter”.
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Bankman was reportedly aware of the potential questions raised by FTX Group funds flowing to his employer, and sought to distance himself publicly from at least some of those donations, stating that, “It seems too close to home for me.”
In December 2022, soon after the FTX exchange went bankrupt, Sam Bankman-Fried said in an interview with the New York Times that his parents “weren’t involved in any of the relevant parts” of the business.
Decrypt has reached out to Stanford University for comment and will update this article should the institution respond.
