FTX Trading pursues damage claim against SBF’s parents

Joseph Bankman and Barbara Fried are accused of turning a blind eye to problems at FTX while enriching themselves and family members

article-image

Old Fort Bay Nassau; JRPHOTOGRAPHY242/Shutterstock, modified by Blockworks

share

The FTX estate has sued the parents of Sam Bankman-Fried, seeking millions of dollars.

Joseph Bankman and Barbara Fried, both tenured Stanford Law School professors, are accused of fraudulent transfers, breaches of fiduciary duties and unjust enrichment, among other wrongdoing, in a complaint filed Monday in Delaware District Court.

The lawsuit alleges that Bankman, who took a leave of absence from Stanford and became an employee of FTX US, was an advisor to various entities within the FTX Group and used his influence to enrich himself, his friends and family.

“Given his background and positions, and the ear of his son Bankman-Fried, Bankman was well-placed to insist on and implement internal controls and raise alarms about the misconduct within the FTX Group,” the complaint states.

Instead, Bankman allegedly received unearned “gifts” and real property, as well as lavish corporate perks, totaling more than $26 million.

Attorneys for the couple called the claims “completely false” in a statement to Blockworks, accusing the FTX attorneys of squandering money that could otherwise be paid out to former customers of the exchange.

“This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins,” Sean Hecker, representing Bankman, and Michael Tremonte, counsel for Fried, said in a statement.

According to the complaint, Bankman “served as a de facto officer, director, and/or manager of FTX Trading, Alameda, Alameda Ltd., and FTX US,” by at least January 2021, and perhaps earlier.

Among his managerial decisions was the selection of FTX’s attorney Daniel Friedberg, and his law firm Fenwick & West, “as the effective general counsel of the FTX Group.”

Friedberg, who previously worked for scandal-ridden Canadian online gaming firm Excapsa Software, was described as Bankman-Fried’s “fixer” in an earlier filing.

Sections of the complaint detailing actions of Friedberg are redacted.

The suit alleges Bankman “ignored red flags” and was involved in questionable decisions such as granting Nishad Singh, FTX’s engineering head, a collateral-free loan of roughly $478 million from Alameda Ltd., in November 2021.

“Bankman’s access to records and financial statements and proximity to the FTX Group’s business dealings gave or should have given him insight into the businesses’ insolvency,” the complaint alleges.

The suit details a $10 million cash transfer to Bankman, structured as a gift to avoid tax, made from Alameda Ltd., as well as a $16.4 million Bahamas residence. It notes “Bankman and Fried still retain title to the property,” despite previous declarations in The Supreme Court of The Bahamas that it was “voluntarily returned.”

Bankman is also said to have orchestrated millions in donations to Stanford University from FTX and Alameda corporate entities.

Fried’s role consisted primarily of coordinating the FTX Group’s political donations, as co-founder of political action committee Mind the Gap, Inc. She resigned after Bankman-Fried’s arrest in November 2022.

Fried advised her son and Singh to “falsify disclosure records,” relating to political donations, the suit alleges. Singh pleaded guilty in February to conspiracy charges and violating federal election laws.

The plaintiffs seek compensatory and punitive damages in an amount to be determined at trial, disgorgement of all of Bankman’s compensation, and the return of transferred property and cash plus expenses, attorneys’ fees and costs.

Updated Sept. 19, 2023 at 10:06 am ET: Added comment from SBF’s parent’s attorneys.


Don’t miss the next big story – join our free daily newsletter.

Tags

Upcoming Events

Hilton Metropole | 225 Edgware Rd, London

Mon - Wed, March 18 - 20, 2024

Crypto’s premier institutional conference returns to London in March 2024. The DAS: London Experience: Attend expert-led panel discussions and fireside chats Hear the latest developments regarding the crypto and digital asset regulatory environment directly from policymakers and experts.

Salt Lake City, UT

WED - FRI, OCTOBER 9 - 11, 2024

Pack your bags, anon — we’re heading west! Join us in the beautiful Salt Lake City for the third installment of Permissionless. Come for the alpha, stay for the fresh air. Permissionless III promises unforgettable panels, killer networking opportunities, and mountains […]

recent research

Top Icon.png

Research

Osmosis thrived in H2 2023 on the back of increased DeFi activity deriving from recently launched Cosmos-related projects and better market conditions. With new value accrual mechanisms for the native token, Osmosis is well-positioned to continue its strong performance in 2024.

/

article-image

Though the opposing flow trend is likely to slow over time, industry watchers note, bitcoin fund assets could one day eclipse the $90 billion gold ETF space

article-image

Celestia had the first mover advantage. EigenDA has staked ether. What sets Avail apart?

article-image

Bitcoin moved 1% higher Monday morning in New York, Matrixport analysts say $62,000 could happen next month

article-image

It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet

article-image

Michael Saylor announced Monday morning that MicroStrategy bought 3k more bitcoin after the X account was compromised over the weekend

article-image

Plus, Pudgy Penguins grows its brand and a group of Autoglyphs sell for $14.5 million