FTX has recently sued Allan Joseph Bankman and Barbara Fried for their alleged involvement in organizing a scheme in which they received $10 million for their personal use from its disgraced founder, Sam “SBF” Bankman-Fried.
The legal representatives for FTX, affiliated with Sullivan & Cromwell law firm, initiated legal action against Bankman and Fried on Monday, September 18.
“As early as 2018, Bankman described Alameda as a ‘family business’ — a phrase he repeatedly used to refer to the FTX Group. Even as the FTX Group descended into insolvency, Bankman and Fried profited handsomely from this ‘family business,‘” said the filed complaint.The complaint proceeded to claim that SBF’s father, a professor at Stanford Law School, wielded extensive decision-making authority for FTX Group in the capacity of a “de facto officer.” It also claimed that Bankman held executive roles within FTX Group’s management team.
SBF’s mother, also a professor at Stanford Law School, was also claimed to have played an active role in FTX’s political funding decisions. Fried was described as the primary influential advisor in FTX Group’s political contributions, repeatedly advocating for substantial donations to Mind the Gap (MTG), a political action committee she helped establish.
The pair were also alleged to have accepted a $16 million luxury residence in the Bahamas bought using “misappropriated” FTX funds when the company was on the verge of collapse.
SBF has insisted that his parents were not engaged in any aspects of the business.
Calls for accountability and asset recovery
FTX, which declared bankruptcy in November last year with a debt of $8.7 billion owed to its customers, saw SBF step down from the position of chief executive. He was arrested and accused of 13 counts, encompassing fraud, money laundering, and bribery of officials.
The complaint alleged that Bankman and Fried were aware of or chose to overlook red flags indicating their son’s orchestration of a deceitful plan to further their personal and philanthropic goals at the expense of the debtors, contradicting SBF’s claims.
FTX urged the court to ensure that Bankman and Fried face consequences for their actions and to reclaim assets on behalf of the debtor’s creditors. “Award plaintiffs punitive damages in an amount to be determined at trial resulting from defendants’ conscious, willful, wanton, and malicious conduct, which exhibits a reckless disregard for the interests of plaintiffs and their creditors,” the complaint reads.
Meanwhile, the attorneys representing Bankman and Fried, Sean Hecker and Michael Tremonte, said the legal action is but an effort to “undermine the jury process just days before their child’s trial begins” and intimidate the pair.
“These claims are completely false. Mr. [John] Ray and his massive team of lawyers, who are collectively running up countless millions of dollars in fees while returning relatively little to FTX clients, know better,” said the couple in a joint statement to Cointelegraph.
SBF is currently detained in jail after previously breaching his bail terms. His first of two trials is slated to commence on October 3 in New York, focusing on seven charges linked to deceptive activities concerning user funds at FTX and Alameda Research.
Other former executives from FTX have admitted guilt in criminal cases. Besides attempting to resolve damages allegedly inflicted by Bankman and Fried, FTX is now pursuing legal action against its former insiders as well as other defendants.