FTX Creditors Sue Founder's Parents Over Alleged Misappropriation of Millions
Summary:
Creditors of defunct cryptocurrency exchange FTX have initiated a lawsuit against the parents of founder Sam Bankman-Fried, accusing them of inappropriately diverting millions of dollars. The legal proceedings claim that the parents, both Stanford Law School professors, used their influential roles within FTX to their advantage to the detriment of the company's creditors. The lawsuit alleges various unjust gains including a $10 million cash gift and a $16.4 million luxury property in The Bahamas. The case also argues that they either knew of or ignored indicators of their son's fraudulent activities. The creditors are seeking to hold the parents accountable for their actions and recover assets.
Creditors of the insolvent cryptocurrency exchange FTX have initiated legal proceedings against the parents of the firm's founder, Sam Bankman-Fried, accusing them of improperly diverting millions of dollars as part of their involvement in the exchange's operations. Lawyers for FTX's creditors and debtors-in-possession from the law practice, Sullivan & Cromwell, launched the lawsuit on September 18 against Joseph Bankman and Barbara Fried, parents of the FTX founder. The accusation states that these parents took advantage of their association with FTX to unjustly enrich themselves to the detriment of the insolvency estate's creditors. The lawsuit disputes Sam Bankman-Fried's assertion that his parents were not involved in the business, claiming that they were integral to FTX's business from its inception to failure.
A statement quoted Joseph Bankman's description of Alameda, FTX’s parent company as a "family business" - a term he frequently applied to the entire FTX Group. Even as FTX Group was headed towards insolvency, Bankman and Fried reaped substantial profits from their stakes in their "family business,” suggest the claimants.
According to the lawsuit, Sam Bankman-Fried's father, a law professor at Stanford University, held extensive power within the FTX Group's governance, being labeled as its "de facto officer." Creditors assert that he held a senior role within FTX Group's management.
Sam Bankman-Fried's mother, another Stanford law professor, is said to have played a significant part in FTX's political contributions. The lawsuit alleges that Fried was a key influence on FTX Group's political contributions strategy, repeatedly persuading the company to pledge millions to the political action committee she co-founded, Mind the Gap (MTG).
The legal claim states that through their involvement in the FTX Group, Bankman and Fried extracted considerable unwarranted benefits, like a $10 million cash gift and a luxury residence in The Bahamas valued at $16.4 million. Bankman is also accused of misappropriating FTX Group's resources to cover extravagant costs such as private jet charters and hotel stays costing $1,200 per night.
By exploiting the FTX Group's funds for their gain, it is alleged that Bankman and Fried were either aware of or ignored indicators that their son was scheming to engage in fraudulent activities to advance their personal and charitable ambitions at the expense of creditors. Hence, creditors are demanding that the court hold Bankman and Fried liable for their actions and seek the recovery of assets for the firm's creditors. The lawsuit is seeking unspecified punitive damages for their alleged reckless disregard for their son’s creditors.
Upon the collapse of FTX, which at one point was a substantial cryptocurrency exchange, Joseph Bankman and Barbara started encountering professional difficulties at Stanford Law School. By late 2022, they reportedly disclosed to friends that the legal expenses linked to their son's case could potentially ruin them. FTX halted its operations and filed for Chapter 11 bankruptcy in November 2022. Retrospectively, its founder and former CEO, Sam Bankman-Fried was arrested and charged with 13 counts of offenses, including fraud, money laundering, and bribery. Sam's first trial covering seven of the allegedly fraudulent operations associated with FTX and Alameda Research, is slated to commence on October 3.
Published At
9/19/2023 9:29:36 AM
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