Bankrupt crypto exchange FTX on Monday sued the parents of founder Sam Bankman-Fried, saying that Stanford professors Joseph Bankman and Barbara Fried used the company to enrich themselves at the expense of FTX’s customers, Reuters reported.
FTX, now being led by turnaround specialist John Ray, said that company founder Sam Bankman-Fried ran FTX as a “family business” and misappropriated billions in customer funds for the benefit of a small circle of insiders, including his parents.
According to Reuters, Sam Bankman-Fried has pleaded guilty to charges that he defrauded FTX customers by using their funds to prop up his own risky investments. He is currently jailed ahead of a trial scheduled to begin Oct. 3. Other former FTX executives have pleaded guilty to criminal charges.
Bankman and Fried’s attorneys, Sean Hecker and Michael Tremonte, said in a joint statement that FTX’s claims were “completely false” and the the new lawsuit was a waste of funds that could be returned to FTX customers.
FTX’s lawsuit alleges that Bankman and Fried accepted a $10-million cash gift and $16.4-million luxury property in the Bahamas from FTX, even as the company teetered on the brink of collapse. Bankman and Fried also pushed FTX to make tens of millions of dollars in charitable contributions, including to Stanford University, FTX said.
Fortune reported that in a late court filing on Monday, the bankruptcy estate of FTX sued the parents of Sam Bankman-Fried, seeking to recover millions of dollars that it alleges were fraudulently transferred and misappropriated.
In the 63-page lawsuit, the estate alleges that FTX was a self-described “family business” despite its appearance as a sophisticated cryptocurrency exchange that was “fueled by fraud.” Allan Joseph Bankman, Bankman-Fried’s father, is a top tax law professor at Stanford Law School, and the lawsuit alleges that he played a key role in “perpetuating this culture of misrepresentations and gross management” and in covering up allegations that would have exposed the fraud, Fortune reported.
According to Fortune, the lawsuit also alleges that Bankman-Fried’s parents “siphoned millions of dollars” from the crypto empire for “their own personal benefit,” with the estate now seeking to claw back the funds as part of its bankruptcy process.
The Block reported that bankrupt cryptocurrency exchange FTX has sued Joseph Bankman, and Barbara Fried, the parents of its founder Sam Bankman-Fried, aiming to recover millions of dollars in “fraudulently transferred and misappropriated funds.”
According to The Block, a Monday court filing showed that debtors of FTX and Alameda Research filed a complaint to recover damages caused by fraudulent transfers, breaches of fiduciary duties and other alleged misconduct.
“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.
In my opinion, it seems very odd that the parents of Sam Bankman-Fried allegedly made what appears to be problematic decisions regarding the amount of money they received from FTX. One would assume that Bankman, who is a top tax law professor, would know better.