FTX Launches Lawsuit Against Ex-Executives Sam Bankman-Fried & Others to Reclaim $1 Billion
FTX- a defunct cryptocurrency exchange has filed a complaint against former CEO Sam Bankman-Fried and other key executives to retrieve more than $1 billion in allegedly misappropriated funds.
The lawsuit, filed by FTX Delaware Bankruptcy Court is under the direction of an executive team led by restructuring expert John Ray, named former Alameda Research CEO Caroline Ellison, FTX Co-Founder Gary Wang, former FTX engineering director Nishad Singh, and Bankman-Fried as defendants.
FTX accused the defendants to be engaged in continuous misappropriation of funds to finance luxury condominiums, political contributions, speculative investments and other pet projects while committing ‘one of the largest financial frauds in history.’
FTX said that the alleged fraudulent transfers occurred between February 2020 and November 2022 when FTX filed for Chapter 11 protection, and can be undone — or ‘avoided’ — under the US bankruptcy code or Delaware law.
FTX is now headed by John Ray, who supported to manage Enron after the energy trader’s 2001 bankruptcy.
Notably, the US prosecutors have named Bankman-Fried the mastermind of a fraud that led to FTX's collapse, and included the misappropriation of billions of dollars of customer funds.
Retaliating to the various accusations, Bankman-Fried has pleaded not guilty to several criminal charges. On the other hand, Ellison, Wang and Singh have pleaded guilty and agreed to cooperate with prosecutors.
According to the recent complaint, the fraudulent transfers included more than $725 million of equity that FTX and West Realm Shires, an entity that Bankman-Fried controlled, awarded ‘without receiving any value in exchange.’
FTX asserted in its complaint that Bankman-Fried and Wang also misappropriated $546 million to buy shares of Robinhood Markets, while Ellison paid herself bonuses amounting to $28.8 million and used $10 million of the funds to purchase a stake in an artificial intelligence company.
The complaint elucidated that Bankman-Fried’s criminal defence is being funded from a $10 million gift he gave his father, distinguished legal scholar Joe Bankman.
“The transfers were made when (FTX-related entities) were insolvent, and defendants knew it,” FTX said.
In bankruptcy cases, transfer of property made within two years of a Chapter 11 filing can be avoided by bankruptcy trustees if they are for less than the market value and made with an intent to defraud the state.