How Does Bail Work? Bail And Bond Mean Different Things

If you plan on committing a crime, it’s good to know beforehand how bail works. This way, you can wisely conduct a cost-benefit analysis to see whether you can afford to pay for your crimes. If you can’t, then it may be best not to do something illegal.

In addition, please note that the terms “bail” and “bond” mean different things.

Bail is the amount of money set by a judge that you must pay to be released from jail while your case is pending. A bond is a contracted financial pledge between you and a bondsman or bonding company whereby you promise to follow the court’s conditions and appear for trial.

How Does Bail Work?

If a defendant cannot deposit the entire bail amount, many turn to bail bond companies to cover any shortfall. The bail bond company collects a fee in return for posting bail. The fee is usually up to 10% of the total bail amount and is non-refundable.

Once the proceedings are over, the bail funds are returned to the defendant if no bond company was used. To receive all funds back, the defendant must have appeared for the court date and not violated the conditions of the bail.

Sam Bankman-Fried’s Record Bail Amount

Sam Bankman-Fried was extradited to the United States and posted a whopping $250 million bail. For a guy who confessed to only having $100,000 in his bank account after the FTX collapse, it is impressive he was able to come up with this sum.

Apparently, Sam’s parents offered their $4 million Palo Alto house as collateral and the rest was secured by two individuals with “considerable” assets. Sam is now free to celebrate the holidays until his trial just like the rest of us.

Hooray for being rich! Some small-time criminals are stuck in jail because they can’t even post $1,000 bail.

It is unlikely Sam Bankman-Fried’s professor parents and friends paid $250 million in cash for Sam’s bail. So exactly how did Sam Bankman-Fried get bailed out?

Finding A Bondsman To Post Bail

As mentioned, the most prevalent method for posting bail is by obtaining a bond through a licensed bail bondsman. The defendant pays the bondsman up to 10% of the bail amount.

In Sam Bankman-Fried’s case, the bail bondsman could charge up to $25 million (10%) to post the entire $250 million bail amount. That’s a great profit if Sam Bankman-Fried doesn’t flee and has collateral actually worth $225 – $250 million. But the fees are likely much less for large bail amounts.

After paying the bail amount, the bondsman will pay the court to secure the defendant’s release.

How did Sam Bankman-Fried come up with the up to $25 million in fees and $250 million bail amount as collateral? Here’s a guess:

  • $100,000 from Sam Bankman-Fried’s savings account
  • $4 million from Sam Bankman-Fried’s parents’ primary residence in Palo Alto, CA
  • $16 million from Sam Bankman-Fried’s parents’ Bahamas vacation property
  • $4.9 million + $10 – $25 million (assuming 4% – 10% of bail amount) bail bondsman fee from two mysterious wealthy friends or relatives
  • $225 million from a bail bondsman

The $16 million Bahamas vacation property, however, is unlikely collateral since Sam’s parents are trying to give it back to FTX to avoid impropriety. Hence, the two mysterious wealthy friends or relatives likely came up with the vast majority of the $250 million in collateral plus bondsman fees.

One clear benefit of being a part of the elite is having other elite friends to help you out!

Posting Enough Collateral For The Bond Company

Is there any bail bondsman that has $250 million cash to cover the full bail amount? Theoretically yes!

Would a bail bondsman be willing to take on that much risk given Sam Bankman-Fried could flee the country? Yes, if the bail bondsman received $250 million worth of collateral it could sell to recover funds. Then there are the fees it would earn if the transaction is a success.

The question now is: Who are these two mysterious wealthy benefactors who contributed so much collateral? They must really love and trust Sam Bankman-Fried to have taken on this amount of financial and reputational risk as guarantors.

The collateral needs to consist of real assets, such as real estate, rare paintings, rare books, and other valuable collectibles. The bail bondsman could accept funny money collateral like stocks and cryptocurrency. But the required amount would have to be higher to provide a financial buffer.

Even bond companies prefer owning real estate over stocks. That should give you a hint on which asset class may be safer for long-term wealth accumulation.

What If The Defendant Flees?

If a defendant like Sam Bankman-Fried flees, then he and the people posting his bail will lose up to $25 million in fees/posted collateral. Assuming a bond company came up with the remaining $225 million, the bond company can then start selling collateral assets by the guarantors.

If a defendant skips out on the court date and there is no collateral, the bond company may use a bounty hunter to look for the defendant. In Sam Bankman-Fried’s case, there is likely no bounty hunter given he had to post $225 million in collateral.

Bounty hunters are paid a percentage of the bond if the defendant is apprehended. They have the authority to arrest the defendant and return him or her to the authorities in the jurisdiction from which the defendant fled.

There is also a time limit to return the defendant. If the time limit is breached, the bond company must pay the entire amount secured by the bond.

That said, a court has the discretion to exonerate the bond if the defendant appears within 180 days of the bail forfeiture date. The defendant just needs a valid excuse, such as an illness or disability.

The Irony Of Being Rich Enough To Be A Criminal

I’m sure every defendant has considered fleeing while out on bail. The level of desire depends on the likely severity of punishment.

In Sam Bankman-Fried’s case, he is looking at at least 11.25 years in federal jail based on the Elizabeth Holmes sentence. If found guilty, perhaps a more reasonable estimate of Sam’s jail time is 25 years. His FTX co-founder Gary Wang and former Alameda Research co-CEO Caroline Ellison have already both pleaded guilty to federal charges.

Because Sam Bankman-Fried donated~ $80 million total to both political parties, he was able to buy two months of freedom before getting arrested. And because Sam Bankman-Fried donated millions to various media outlets, he was also able to hold back media criticism for a similar period of time.

Now, by posting $250 million in bail, Sam buys even more time until his trial date. Hence, the richer you are, the more crime you can afford to commit. How ironic!

Money truly buys freedom.

Why Bother Committing A Financial Crime If You’re Already Rich?

Given rich people don’t need more money, the underlining driver for committing a crime must be status, prestige, and/or power.

Think about all the interviews Sam Bankman-Fried made, carefully crafting his image as an effective altruist. He was buttered up by the press, calling him the next JP Morgan. Some members of Congress loved him.

As FTX and Alameda research started losing money, Sam’s fear of losing his status grew. Therefore, Sam and his co-conspirators may have taken an illegal risk to prop up their company’s losses, which ultimately backfired in a bear market.

The unhealthy desire for more recognition happens everywhere. One personal finance blogger mentioned to me he was so fixated on fame that his wife left him. She was tired of him always giving media interviews, spinning stories, and drawing unwanted attention to their personal lives.

In 2011, Raj Rajaratnam, the billionaire hedge fund manager went to jail for seven years for insider trading. Even if you are worth over a billion dollars, it may not be enough. Below is an interview where Raj shares what happened and why he doesn’t think he did anything wrong.

Be careful craving too much status, prestige, and/or power. Your addiction might ultimately lead you to destroy all that you’ve built.

Reader Questions And Recommendations

Any criminal lawyers out there want to share more about how bail works? What exactly happens to defendants who flee? Where do you think Sam Bankman-Fried came up with $250 million in collateral plus bondsman fees?

If you want to be free without having to post bail, pick up a copy of Buy This, Not That. The book will help you make more optimal decisions so you can live a better life.

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