Debtors of the bankrupt FTX exchange launched legal action against the parents of FTX founder Sam Bankman-Fried (SBF), alleging misappropriation of millions of dollars through their involvement in the exchange’s business.
FTX debtors’ counsel, represented by law firm Sullivan & Cromwell, filed a lawsuit against SBF’s parents, Joseph Bankman and Barbara Fried, on September 18. The plaintiffs accused Bankman and Fried of exploiting their access and influence into FTX to enrich themselves at the expense of FTX customers’ funds. They are accused of being “deeply involved” in FTX’s business from inception to bankruptcy, contrary to SBF’s claims.
“In early 2018, Bankman described Alameda as a ‘family business’ – a phrase he repeatedly used in reference to FTX Group. Even when FTX Group went bankrupt, Bankman and Fried profited significantly from this ‘family business,'” the complaint states.
According to the plaintiffs, SBF’s father, a professor at Stanford Law School, had broad authority to make decisions for FTX Group as a “de facto officer”. Bankman also held executive positions in FTX Group’s management, according to the debtor. SBF’s mother, also a Stanford Law School professor, was actively involved in FTX’s political donations. According to them, Fried served as the “single most influential advisor” in FTX Group’s political contributions, repeatedly soliciting millions of dollars in donations to Mind the Gap (MTG), a political action committee she founded.
According to them too, Bankman and Fried earned significant money (beyond the income from their involvement in FTX Group), including a $10 Million USD cash gift and a $16.4 Million USD luxury property in the Bahamas. Bankman also siphoned off FTX Group funds to cover his expenses, including private jet charters and $1,200 USD per night hotel stays.
By using FTX Group funds to their advantage, Bankman and Fried knew or ignored signs that their son was orchestrating a fraudulent scheme to promote their personal and charitable interests at the expense of the debtor. The debtors asked the court to hold Bankman and Fried accountable for their misconduct and recover FTX customers’ assets.
Bankman and Fried’s counsel, Sean Hecker and Michael Tremonte argued that the lawsuit was an attempt to “undermine the judging process just days before their son’s trial begins.” They said: “This claim is completely false. Mr. Ray and his enormous team of lawyers, who collectively incurred millions of dollars in fees while returning relatively small amounts to FTX clients, know better.” As previously reported, Bankman and Fried began facing professional problems at Stanford Law School soon after FTX collapsed. In late 2022, SBF’s parents also reportedly told friends that their son’s legal sanctions would likely cost them financially.
FTX used to be the world’s 2nd largest crypto exchange, but ceased operations and filed for Chapter 11 bankruptcy in mid-November 2022. FTX’s founder and former CEO, SBF was subsequently arrested and charged with 13 counts, including fraud, money laundering, and bribery of officials. The first of SBF’s two trials is scheduled for October 3, where he will face seven charges related to fraudulent activity involving FTX and Alameda Research user funds.
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