Debtors of the bankrupt cryptocurrency exchange FTX have launched legal action against the parents of FTX founder Sam “SBF” Bankman-Fried, alleging that they misappropriated millions of dollars through their involvement in the exchange’s business.
The counsel for FTX debtors and debtors-in-possession, represented by the law firm Sullivan & Cromwell, filed a lawsuit against SBF’s parents, Joseph Bankman and Barbara Fried, on Sept. 18.
The plaintiffs argued that Bankman and Fried exploited their access and influence within the FTX empire to enrich themselves at the expense of the debtors in the FTX bankruptcy estate. The debtors alleged that SBF’s parents were “very much involved” in the FTX business from inception to collapse, contrary to what SBF has claimed.
“As early as 2018, Bankman described Alameda as a ‘family business’ — a phrase he repeatedly used to refer to the FTX Group. Even as the FTX Group descended into insolvency, Bankman and Fried profited handsomely from this ‘family business,’” the complaint reads.
According to the plaintiffs, SBF’s father, a Stanford Law School professor, had broad authority to make decisions for FTX Group as its “de facto officer.” Bankman also held executive positions on FTX Group’s management team, the debtors argued.
SBF’s mother, also a Stanford Law School professor, was actively involved in FTX’s political donations, the plaintiffs wrote. According to the allegations, Fried served as the “single most influential advisor” in FTX Group’s political contributions, repeatedly calling upon FTX to donate millions directly to Mind the Gap (MTG), a political action committee that she co-founded.
According to the complaint, Bankman and Fried extracted significant unearned rewards from their involvement in FTX Group, including a $10-million cash gift and a $16.4-million luxury property in the Bahamas. Bankman also siphoned off FTX Group’s money to cover costs, including privately chartered jets and $1,200-per-night hotel stays, the plaintiffs alleged.
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By draining FTX Group’s funds to their benefit, Bankman and Fried either knew or ignored red flags revealing that their son was orchestrating a fraudulent scheme to promote their personal and charitable interests at the debtors’ cost, the plaintiffs said. The debtors called on the court to hold Bankman and Fried accountable for their misconduct and recover assets for the debtors’ creditors, stating:
“Award plaintiffs punitive damages in an amount to be determined at trial resulting from defendants’ conscious, willful, wanton, and malicious conduct, which exhibits a reckless disregard for the interests of plaintiffs and their creditors.”
Bankman and Fried’s counsels Sean Hecker and Michael Tremonte subsequently described the lawsuit as an attempt to “undermine the jury process just days before their child’s trial begins” in a joint statement to Cointelegraph. They wrote:
“These claims are completely false. Mr. Ray and his massive team of lawyers, who are collectively running up countless millions of dollars in fees while returning relatively little to FTX clients, know better.”
As previously reported, Bankman and Fried began facing professional issues at Stanford Law School soon after FTX collapsed. In late 2022, SBF’s parents also reportedly told friends that their son’s legal bills would likely wipe them out financially.
Once a major cryptocurrency exchange, FTX stopped operating and filed for Chapter 11 bankruptcy in mid-November 2022. FTX founder and former CEO SBF was subsequently arrested and charged with 13 counts, including fraud, money laundering and bribing officials. SBF’s first of two trials is scheduled to start on Oct. 3, where he will face seven charges related to fraudulent activities involving user funds at FTX and Alameda Research.
Sourced from cointelegraph.com.
Written by Helen Partz on 2023-09-19 09:29:36.
