Already a subscriber? Make sure to log into your account before viewing this content. You can access your account by hitting the “login” button on the top right corner. Still unable to see the content after signing in? Make sure your card on file is up-to-date.
FTX has initiated a lawsuit against the parents of its founder, Sam Bankman-Fried, alleging misuse of company funds.
The complaint, lodged on Monday in a Delaware bankruptcy court, accuses Allan Joseph Bankman and Barbara Fried of wrongly diverting millions from the now-bankrupt cryptocurrency exchange. FTX declared bankruptcy last November after a massive financial drain, similar to a bank run. While Sam Bankman-Fried faces allegations of fraudulently using company funds for high-end real estate and contributions to politicians, he has denied all charges. His trial on US federal fraud charges begins on October 3 in Manhattan, with several former FTX executives admitting to conspiracy and fraud.
The lawsuit claims that both parents, former Stanford law professors, had a hand in the malpractices that ultimately led to FTX’s downfall. The filing states that FTX, once perceived as a proficient group of cryptocurrency exchanges, operated more as a “self-described ‘family business.'” The suit further alleges that the parents helped design a scheme allowing their son to transfer a non-taxable $10 million “gift” to them and that over $18.9 million from FTX was used to purchase a luxury Bahamas residence for Bankman and Fried. Additionally, more than $5.5 million was reportedly directed from FTX to Stanford University in an act of “naked self-dealing.”
Denying all allegations, lawyers representing SBF’s parents have targeted John Ray III, FTX’s CEO during its bankruptcy filing, claiming these accusations aim to undermine the upcoming trial of their son.
The lawsuit also touches upon unlawful political donations, accusing Fried of guiding FTX insiders, including her son, in making unauthorized contributions. Nishad Singh, former FTX engineering chief, admitted to charges, including conspiracy in making unlawful political donations, channeled via Alameda, the hedge fund associated with Bankman-Fried.