Bankrupt cryptocurrency exchange FTX is suing the parents of founder Sam Bankman-Fried, alleging they manipulated their relationship to improperly divert millions of dollars from the company. Here are the details…
Cryptocurrency exchange files lawsuit against SBF’s family
Alameda Research LLC, Alameda Research Ltd, FTX Trading Ltd, West Realm Shires, Inc. and West Realm Shires Services Inc. (FTX.US) filed a complaint against Allan Bankman and Barbara Fried in Delaware bankruptcy court on September 18. Bankman is a law professor at Stanford and Fried is a professor emerita at the same law school. The complaint alleges that Bankman and Fried used their insider access to enrich themselves before FTX collapsed in November 2022. The debtors claim that Bankman and Fried knew or should have known that FTX was in financial danger but were focused on their profits. The lawsuit accuses Bankman of breach of fiduciary duty and aiding and abetting fraud, among other allegations.
Fried is accused of aiding and abetting fraud and unjust enrichment related to his political fundraising activities. Specifically, the complaint alleges that Joseph Bankman and Barbara Fried received $10 million in cash gifts, a $16.4 million luxury estate in the Bahamas, more than $5 million in donations to Stanford University, where they worked, and other FTX-funded benefits, all of which they claimed were financial statements at FTX. It is alleged that they did so knowingly or ignoring red flags about problems and inappropriate behavior.
Complaints about Allan Joseph Bankman
The complaint alleges that Allan Joseph Bankman held key advisory roles at FTX where he could have implemented controls or raised issues but instead remained silent. Bankman allegedly served as pro bono legal counsel for FTX Trading, Alameda Research and other affiliates and had broad decision-making authority as a de facto director. He ignored red flags about improper use of customer funds and other fraudulent practices and helped cover up a 2019 whistleblower complaint alleging abuse.
The complaint also states that Bankman breached his fiduciary duties, causing more than $5.5 million in donations to FTX to be diverted to his employer, Stanford University. Knowing that FTX was in financial trouble, Bankman recommended diverting the $10 million gift to avoid taxes. Ultimately, Bankman allegedly took a leave of absence from Stanford to focus on FTX, which was heading towards bankruptcy. During this period, he reportedly lobbied for a hefty salary increase for his son. Before the bankruptcy, Bankman enriched himself with luxury travel, appearances in FTX commercials and other perks.
Complaints against Barbara Fried
It is also alleged that Barbara Fried pushed for political donations that violated campaign finance laws. Fried allegedly served as Sam Bankman-Fried’s chief advisor on political donations. He repeatedly pressured him and other FTX executives to contribute millions of dollars to a political action committee called Mind the Gap, which Fried co-founded. Additionally, the complaint alleges that Fried encouraged Bankman-Fried and others to make political donations in violation of campaign finance laws, including using straw donors to conceal the source of the funds.
FTX companies are seeking to reverse improper transfers and benefits allegedly received by Bankman and Fried. They assert claims for fraudulent transfer, breach of fiduciary duty, unjust enrichment, and other causes of action.
