FTX sues Sam Bankman-Fried’s dad and mom for tens of millions in ‘misappropriated funds’

Sep 19, 2023 | blog

Barbara Fried, mom of Sam Bankman-Fried, the founding father of bankrupt cryptocurrency trade FTX, leaves the courthouse, after U.S decide revoked Bankman-Fried’s bail, in New York, August 11, 2023.
Eduardo Munoz | Reuters

Bankrupt crypto trade FTX is trying to claw again luxurious property and “millions of dollars in fraudulently transferred and misappropriated funds” from the dad and mom of Sam Bankman-Fried, the trade’s disgraced ex-CEO and founder.

In a Monday court docket submitting, legal professionals representing the chapter property of the failed trade alleged that Allan Joseph Bankman and his spouse, Barbara Fried, “exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars.”

The lawsuit, which was filed in a U.S. District Court in Delaware, goes on to assert that “despite knowing or blatantly ignoring that the FTX Group was insolvent or on the brink of insolvency,” Bankman and Fried mentioned with their son the switch of a $10 million money present and a $16.4 million luxurious property in The Bahamas.

The go well with goes on to allege that as early as 2019, Sam’s father straight participated in efforts to cowl up a whistleblower criticism which threatened to “expose the FTX Group as a house of cards.” The submitting additionally particulars emails written by Bankman wherein he complained to the FTX US Head of Administration that his annual wage was $200,000, when he was “supposed to be getting $1M/yr.”

That grievance was in the end elevated to his son in an e mail, in line with the lawsuit: “Gee, Sam I don’t know what to say here. This is the first [I] have heard of the 200K a year salary! Putting Barbara on this.”

The submitting characterizes the correspondence as Bankman lobbying his son to “massively increase his own salary.” Within two weeks, the go well with claims that Bankman-Fried had collectively gifted his dad and mom $10 million in funds coming from Alameda, and inside three months, the couple was deeded the $16.4 million property in The Bahamas.

According to the partially-redacted submitting, Bankman-Fried’s dad and mom additionally “pushed for tens of millions of dollars in political and charitable contributions, including to Stanford University, which were seemingly designed to boost Bankman’s and Fried’s professional and social status.” Fried can be accused of encouraging her son and others throughout the firm to keep away from, if not violate, federal marketing campaign finance disclosure guidelines by “engaging in straw donations or otherwise concealing the FTX Group as the source of the contributions.”

Bankman-Fried’s dad and mom are authorized students who taught at Stanford Law School. His mom is an professional on ethics, whereas his father focuses on taxes. Bankman-Fried himself independently faces a number of wire and securities fraud fees associated to the alleged multibillion-dollar FTX fraud.

Federal prosecutors and regulators allege that Bankman-Fried was the motive force of “one of the biggest financial frauds in American history,” within the phrases of U.S. Attorney Damian Williams. The Justice Department has charged the previous FTX CEO with utilizing billions of {dollars} in buyer cash to fund VC investments, purchase property and make political donations. Bankman-Fried has pled not responsible to all fees, and his felony trial kicks off on Oct. 3 in Manhattan.

Bankman and Fried “either knew — or ignored bright red flags revealing — that their son, Bankman-Fried, and other FTX Insiders were orchestrating a vast fraudulent scheme,” the lawsuit stated.

FTX’s new management group has spent months making an attempt to piece again collectively billions of {dollars} in lacking belongings belonging to the digital asset trade.

The trade’s lawsuit towards Bankman-Fried’s dad and mom asks for a mixture of compensatory aid, together with punitive damages ensuing from Bankman and Fried’s “conscious, willful, wanton, and malicious conduct,” in addition to the return of any property or funds made to the pair from FTX. If a decide guidelines in favor of the bankrupt trade, it’s unclear how the clawbacks would possibly have an effect on Bankman and Fried’s capability to pay for his or her son’s authorized charges as he heads to trial subsequent month.

Legal counsel for Bankman and Fried stated in a written assertion to CNBC that FTX’s Tuesday’s submitting “is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins,” including that “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,” continues the assertion from Bankman and Fried’s attorneys.

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