FTX sues SBF’s parents to claw back misappropriated millions

abdelaziz Fathi

FTX, the now-defunct cryptocurrency exchange, has filed a lawsuit against its founder and former CEO Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried, alleging that they used their access to the company for personal gain and misappropriated millions of dollars in funds.

Sam Bankman-Fried

The lawsuit, which was filed in a federal court in Delaware on Monday, alleges that Joseph Bankman leveraged his background as a tax law expert and Stanford law professor to secure a prominent role at FTX, where he eventually became a “de facto” officer, strategically advising and overseeing FTX operations.

The lawsuit also alleges that Barbara Fried was involved in her son’s political contribution strategy and used her “access and influence to benefit MTG [Mind the Gap], an independent expenditure-only political action committee that she co-founded in 2018 and for which she served as President and Chair.”

The lawsuit does not quantify the total amount that Joseph and Barbara Bankman may have misappropriated from their son’s crypto empire, but it does provide some specific examples. For example, FTX alleges that the Bankmans may have expensed $1,200-per-night hotel stays, plane tickets, and salaries. Joseph Bankman also received an annual salary of $200,000 for his role as a senior adviser to the FTX foundation, more than $18 million for a property in the Bahamas, and $5.5 million in FTX Group donations to Stanford University.

“FTX Trading paid $18,914,327.82, inclusive of taxes, fees, and costs, for Blue Water, to which Bankman and Fried received title, as well as various expenses related to Blue Water totaling more than $90,000. Bankman’s command of tax law and unique understanding of the FTX Group’s muddled corporate structure allowed him to facilitate the transfer of a cash gift totaling $10 million to himself and Fried consisting of Alameda Ltd. Funds,” the filing further explains.

The lawsuit also alleges that Joseph Bankman was part of the small group that attempted to sell FTX to Binance in a last-ditch effort to save the company.

FTX is seeking damages, the return of any property or payments given to the Bankmans by FTX, and punitive damages resulting from “conscious, willful, wanton, and malicious conduct.”

The lawsuit against Sam Bankman-Fried’s parents also alleges that Bankman assisted other FTX insiders in dissipating the exchange’s funds on donations and played a role in covering up a whistleblower complaint from September 2019.

“Bankman portrayed himself as the proverbial adult in the room—and was uniquely positioned to fulfill that role—as he worked alongside inexperienced fellow executive officers, directors, and managers responsible for safeguarding billions of dollars,” the filing reads.

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