FTX Estate Sues Sam Bankman-Fried's Parents for Fund Recovery

Police & Regulations
Sep 19, 2023 at 02:02 pm

FTX, the cryptocurrency exchange currently navigating bankruptcy proceedings, has taken legal action against the parents of its founder and former CEO, Sam Bankman-Fried. The lawsuit aims to reclaim what FTX contends are "funds that were fraudulently transferred and misappropriated." This legal step was revealed in a court filing submitted on Monday.

The filing, which includes redacted sections, requests the court's authorization for the FTX estate to pursue damages and the recovery of any assets or payments granted to Bankman and Fried by FTX in the past. Additionally, it calls for punitive damages in response to their alleged "conscious, willful, wanton, and malicious conduct."

As an example, the filing highlights a payment of $18,914,327.82 made by FTX Trading for the purchase of a property named Blue Water, which subsequently came under the ownership of Bankman and Fried. The filing also alleges that Bankman orchestrated a transfer of $10 million from Alameda Ltd. funds to himself and Fried.

It argues that Bankman and Fried, both accomplished law professors, utilized their expertise and veneer of legitimacy not for the advancement of the FTX Group, but for the furtherance of their own interests and charitable causes.

Furthermore, it asserts that Bankman, in light of his position, should have been aware of the precarious financial state of the FTX Group. This cognizance should have extended to instances such as Bankman's participation in a Super Bowl commercial and his extraction of substantial sums from the group.

Joseph Bankman and Barbara Fried serve as professors at Stanford Law School. The complaint alleges that Bankman assisted other FTX insiders in diverting funds towards donations and took part in concealing a whistleblower complaint from September 2019.

The filing underscores Barbara Fried's pivotal role in SBF's political contribution strategy. It states that she utilized her influence to promote the interests of MTG (Mind the Gap), a political action committee she co-founded, for which she served as President and Chair.

While the filing provides specific expense details, it refrains from specifying the total amount allegedly misappropriated by Bankman and Fried. The listed items include hotel stays costing $1,200 per night, airfare, and salaries. Bankman received an annual salary of $200,000 as a senior adviser to the FTX foundation. Additionally, it is claimed that he received over $18 million for the Bahamas property and directed $5.5 million in FTX Group donations to Stanford University.

The filing also implies that Bankman was part of a select group that made a last-minute attempt to sell FTX to Binance.

Bankman was among those who received the Binance Letter of Intent and was slated for a meeting with Binance on November 10, 2022, the day before the Chapter 11 filing. Sam Bankman-Fried is presently gearing up for an impending trial while in custody. Representatives for Bankman and Fried have not yet issued a comment.

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