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How Does Bail Work? Bail And Bond Mean Different Things

Updated: 01/30/2023 by Financial Samurai 20 Comments

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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Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

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Comments

  1. Jessie Holloway says

    January 4, 2023 at 9:34 am

    Thanks so much for the examples and for explaining how bail bonds work. My partner’s uncle recently got into some legal trouble and he reached out to ask for help with bail. his brother has been looking into finding a bail bondsman to help him pay the bail amount.

    Reply
  2. Michael says

    December 27, 2022 at 2:32 am

    In the federal court system, the court can simply allow something called a “Personal Surety” bond.
    I’ve seen it happen many times. Parents or relatives will stand up and guarantee that the defendant will appear. In many cases, there are no assets.

    That’s what happened here. The court may as well have said bail was a gazillion dollars. It wouldn’t have made a difference. Federal judges have weird god-like powers and using the personal surety card is just one of the tools in their magical arsenal.

    Reply
  3. Richie says

    December 24, 2022 at 7:04 am

    Sam,
    In reading this, I’m reminded of one of my favorite lines from Moby Dick. Early in the book, a pastor is giving a sermon about the story of Jonah and he says, “In this world, shipmates, sin that pays its own way can travel freely and without a passport; whereas Virtue, if a pauper, is stopped at all frontiers.” I know Sam have his passport up but the point is the same nonetheless. Merry Christmas

    Reply
  4. Dunning freaking kruger says

    December 23, 2022 at 7:07 pm

    My background: over 28 years in law enforcement. 16 of which have been in criminal Investigation. Of the 16 the majority were investigating Sinaloa cartel, street dealers, criminal street gang members and prison gang members.

    Bail can be secured appearance or cash. Secured appearance requires 10% cash and the remaining 90% in collateral. Or a less than Honest bondsman willing to determine their own terms off the books.

    In this case prosecutors should
    Be evaluating the need for a Nebbia hearing. Nebbia is a court hearing used to determine origin of currency used to post bond. Bail and bond are a bit of semantics. Judges determine the bond for a defendant at initial appearance.

    IA is the first court process. Due process attaches at the IA appearance.

    I digress. If bond was set at 250,000,000 secured appearance then SBF must post 25,000,000 and the rest in collateral. If bond was set at 250,000,000 cash only then he must post 250,000,000 cash.

    Regardless, prosecutors should be drafting affidavits requiring SBF and his supporters to show origin of all cash proceeds used to secure his bail.

    Based on statements made by Ellison on the record, all cash is likely obtained via fraud. If SBF and his barristers are unable to provide documents demonstrating legitimate origin of the cash seizure warrants should be served.

    All proceeds would then be seized. Then hearings would be set. Either jackass pathological liar SBF discloses origins of cash or the state recovers the assets. Those
    Monies would be returned to victims. And SBF would be remanded to custody until he takes a plea or goes to trial.

    Reply
    • Financial Samurai says

      December 24, 2022 at 6:24 am

      Thanks!

      “Secured appearance requires 10% cash and the remaining 90% in collateral. Or a less than Honest bondsman willing to determine their own terms off the books.”

      Sounds like a bondsman, like an investor, can figure out their own risk tolerance and determine how much actual cash and collateral to obtain.

      Based on the reports so far, it is two wealthy benefactors plus parent’s primary residence putting everything up. What a fascinating story to follow during the holidays and new year.

      Reply
      • dunning freaking kruger says

        December 24, 2022 at 9:21 am

        I suppose so under circumstances that fall into the category of normal. This is hardly normal.

        Never heard of a $250,000,000 bond. Prosecutors have to be licking their chops to get a Nebbia hearing set up. And SBF attorneys have to be a bit apprehensive. They don’t won’t to lie about a material fact regarding the origin of the cash. None of the attorneys involved have ever dealt with such a bond.

        It is absolutely fascinating.

        Reply
        • Financial Samurai says

          December 24, 2022 at 10:29 am

          Do you envision a scenario where the prosecutors hope Sam Bankman Fried flees in order to keep the $250 million in collateral? And then when the government finally catches him, what is the rule on giving the collateral back? Surely there has to at least be a huge penalty and take on the collateral.

          Reply
          • Dunning freaking kruger says

            December 24, 2022 at 2:29 pm

            If he flees there would be a bond forfeiture hearing. The people that posted the bond would, high probability, lose. Bond is forfeited, federal arrest warrant issued with a no bond hold.

            So most likely he would have an Unlawful Flight to Avoid Prosecution (UFAP) warrant stacked.

            I’ll speculate he would
            Land on the FBI top 10 and US Marshals top 15 fugitives lists. He has hidden resources but he is certainly not a seasoned criminal. He would be unable to hide for Long.

            US Marshals have purview over people who violate pretrial release conditions in the federal court system. US Marshals would track him down.

            Once he absconds and bond is forfeited he would be held non-bondable once captured. Meaning he remains in custody until he takes a plea or goes to trial. Unlikely he goes to trial. His co-conspirators have already rolled over and will testify in court. They will be able to outline for jury their entire scheme.

            I cannot speculate if US Attorneys want him to flee. But I’d bet they would see at as an opportunity to seize the bond, get him captured and keep him
            Locked up Until trial.

            This large of a fraud is astronomical. The sentencing guidelines federally would
            Expose him to a lifetime sentence. He has earned it.

            Let’s hope people that had money in FTX are
            Able to get some it back. But I think it
            Is unlikely.

            Many more people
            Overtime will be indicted and
            Convicted. I suspect his parents are in the cross hairs.

            Reply
            • Al Corrupt says

              December 27, 2022 at 7:13 pm

              SBF is Jewish. Israel has no extradition treaty with the U.S., and has previously refused to return fugitives. If he makes it to Israel, he’s free.

              Reply
              • Financial Samurai says

                December 27, 2022 at 8:58 pm

                Makes sense.

                Reply
  5. Andy says

    December 23, 2022 at 7:00 pm

    Yeah I think bail and bond is being confused here. My understanding is that it is a bond and that SBF’s parents put up the equity in their house as collateral and a lien will be placed on their home in early Jan. However, the really crazy twist is that Stanford University is listed as a Primary Owner of SBF’s Parents home! That in and of itself isn’t unusual for professors at Stanford as Stanford leases and rents homes to faculty and staff to help offset costs of living and as a recruitment tool. However, did Stanford board agree to this arrangement and are they effectively helping SBF post bond?? Also there is a photo of SBF flying home to his mommy and daddy in business class… so absolutely ridiculous.

    That spoiled kid needs to be locked up alone and get that smug grin wiped off his face while sitting in a cold hard jail cell for the horrible crimes he committed and life savings that he stole from millions of people. It’s not a non-violent crime.. its very likely people have considered or committed suicide and died because of losses incurred due to SBF’s fraud…

    Reply
    • Financial Samurai says

      December 24, 2022 at 6:27 am

      I saw that regarding Stanford University on title. Another mystery! It’s common to use subsidized or free housing to recruit such professors, who are in high demand from other elite institutions. That is an interesting assumption and implication Stanford University technically helping bail SBF out as well if so!

      SBF did look pretty comfy in business/first class flying home for the holidays. I might have to drive down to Stanford and play some tennis and Pickleball and then walk by and say hello.

      Reply
  6. Bill says

    December 23, 2022 at 12:27 pm

    The NYT erroneously reported that the 250 million was bail. It was a 250 million bond. Big difference. The prosecutor is just grandstanding with the dollar amount. It could be a trillion dollars and his parents putting up their 4 million dollar house ,”that still has a mortgage” and it would be enough to satisfy a bond.

    Reply
  7. Joe says

    December 23, 2022 at 10:11 am

    Just google FTX, Money laundering, Ukraine, Democratic party – and it will all make sense who the ‘mystery’ donors may be.

    Reply
    • Financial Samurai says

      December 23, 2022 at 10:14 am

      What’s your guess if the two people?

      Reply
      • Alias says

        December 23, 2022 at 11:38 am

        The Clinton’s!

        Reply
  8. Tom says

    December 23, 2022 at 10:00 am

    Also factor in how Carlos Ghosn escaped Japanese prison and is still free to this day.

    Reply
  9. Untemplater says

    December 23, 2022 at 9:03 am

    His story sure is an entertaining one. The allure of power and prestige definitely seems to draw some people into crime doing a lot of illegal activities. I’m shocked that he posted that much bail. But I wasn’t familiar with the details of how bail and bond works in detail so thanks for the insights!

    What’s also upsetting is the amount of local crime that happens while people in the government just look the other way. They even release violent criminals, it’s really upsetting.

    Reply
  10. Kevin says

    December 23, 2022 at 7:48 am

    This guy’s playing games from the 1980’s. For the $80MM he donated to politicians, he could’ve campaigned for office and received a permanent get out of jail free card.

    Reply
  11. IndianMama says

    December 23, 2022 at 6:18 am

    Ha ha, I needed a laugh today. I’ve been on the fence about bail. In NY state, where I live, criminals are given ridiculously low bails and let out, only to be arrested again and again, it’s a revolving door.

    Reply

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