FTX sues Sam Bankman-Fried’s parents to claw back funds
FTX was a self-described ‘family business,’ lawsuit says
The managers of the bankrupt cryptocurrency exchange FTX have filed a lawsuit against the parents of co-founder and former CEO Sam Bankman-Fried in order to “recover millions of dollars in fraudulently transferred and misappropriated funds.”
Allan Joseph Bankman and Barbara Fried allegedly used their access and influence within FTX to “enrich themselves, directly and indirectly, by millions of dollars,” at the expense of debtors and creditors, according to a court filing on Monday.
Bankman-Fried’s FTX empire imploded last November, according to prosecutors, in what was one of the largest financial frauds in US history. When it filed for bankruptcy, FTX owed customers approximately $8.7 billion, and approximately $7 billion in liquid assets have been recovered so far.
According to the filing, as a formal employee of an FTX entity, Bankman should have been well-equipped given his legal expertise to identify wrongdoing at the company well before its rapid unraveling. And it appears that he chose to ignore clear red flags in several instances.
Bankman and Fried are well-known legal scholars who previously taught at Stanford Law School. Bankman specializes in taxes, whereas Fried specializes in ethics.
“This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins,” Bankman and Fried’s attorneys said in a statement. “These claims are completely false.”
Despite “knowing or blatantly ignoring” that FTX was insolvent or on the verge of insolvency, Bankman and Fried discussed a $10 million cash gift and a $16.4 million luxury property in the Bahamas with Bankman-Fried, according to the filing. In addition, the pair “pushed for tens of millions of dollars in political and charitable contributions.”
According to the filing, Bankman appeared to be acutely aware of the company’s risk of failure. He began discussions about how to protect assets, including primary residences, from bankruptcy a year before FTX filed for Chapter 11.
Despite Bankman-Fried’s claim that his parents “weren’t involved in any of the relevant parts” of the business, the FTX Group has self-described over the years as a “family business,” according to the filing. Bankman’s role appeared to become more involved in the months leading up to the company’s insolvency.
More here: FTX’s Credibility Claim Was a Family Affair: Bloomberg Crypto
According to court documents, the filing includes details of spending sprees, particularly by Bankman, who began working for FTX Philanthropy in 2021. In one case, he gave a former law student a “free trip to France,” which included Formula One Grand Prix tickets worth several thousand dollars.
Although Fried was not officially employed by the cryptocurrency exchange, she wielded power over the company’s finances. According to the lawsuit, she is the “single most influential advisor” regarding her son’s and FTX’s political contributions. According to court documents, she had Bankman-Fried donate millions to a political action group she co-founded.
Alameda Research LLC, et al. v. Allan Joseph Bankman and Barbara Fried, 22-110678, United States Bankruptcy Court for the District of Delaware.
