Bankrupt cryptocurrency exchange FTX has sued founder and former chief executive Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried, to “recover millions of dollars in fraudulently transferred and misappropriated funds,” a Sept. 18 court filing shows.
Filed by FTX, along with Alameda Research and their debtors, the document asks the court to award the FTX estate damages, the return of any property or compensation made to the parents by FTX, and punitive damages resulting from “conscious, willful, wanton, and malicious conduct,” among other prayers for relief.
“As Bankman-Fried’s parents, Bankman and Fried exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars, and knowingly at the expense of the debtors in these Chapter 11 Cases… and their creditors,” the filing said.
The filing pointed out that the FTX Group was a “self-described ‘family business,’” fueled by fraud for the benefit of insiders comprised of Bankman-Fried, Daniel Friedberg, Gary Wang, NIshad Singh, and Caroline Ellison. It further alleges that Bankman-Fried’s parents used their decades of experience as “sophisticated law professors and veneer of legitimacy” to plunder in order to enrich themselves. It said:
“And together, Bankman and Fried siphoned millions of dollars out of the FTX Group for their own personal benefit and their chosen pet causes. This action seeks to hold them accountable for their misconduct and recover assets for the Debtors’ creditors.”
Both Bankman and Fried are professors at Stanford Law School. The filing further alleges that Bankman aided other FTX insiders to dissipate FTX group funds on donations and cover up a whistleblower complaint from September 2019.
Meanwhile, Fried was the “point person” for Bankman-Fried’s political contribution strategy, “describing herself as Bankman-Fried’s “partner in crime of the noncriminal sort.” The complaint added that she also used her access and influence to benefit Mind the Gap (MTG), an independent expenditure-only political action committee that she co-founded in 2018. Fried has also served as the organization’s president and chair.
While the filing did not specify the total amount of funds Bankman and Fried may have misappropriated, it provided certain line items. FTX alleged that either or both of them may have spent thousands of dollars on luxury hotel stays, plane tickets, and salaries. Bankman earned $18 million for his property in the Bahamas, $5.5 million in donations to Stanford University, and an annual salary of $200,000 as a senior advisor to the FTX Foundation.
The filing further alleges that Bankman was part of the small group that attempted a last-ditch effort to sell FTX to cryptocurrency exchange Binance.
Bankman-Fried’s trial begins on Oct. 3. He is preparing for it behind bars after Federal Judge Lewis Kaplan from the District Court for the Southern District of New York revoked SBF’s bail on Aug. 11 for attempting to influence witnesses.