In a recent development reported by Coindesk on Tuesday, creditors of FTX have launched legal proceedings against the parents of the company’s founder, Sam Bankman-Fried (SBF), in an attempt to recover funds believed to have been fraudulently transferred and misappropriated.
The legal saga involving SBF and FTX has taken unexpected turns throughout the year, but this latest twist is particularly intriguing. According to the report, Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried, who are both professors at Stanford Law School, are now potentially entangled in the alleged grand-scale fraud that occurred within the once-largest cryptocurrency exchange in the world.
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FTX Files Lawsuit Against SBF’s Parents
As per the Coindesk report, FTX has filed a lawsuit against the founder and former CEO’s parents, Joseph Bankman and Barbara Fried, with the aim of “recovering millions of dollars in fraudulently transferred and misappropriated funds,” according to a court filing made on Monday.
The court document refers to SBF’s mother as “Fried” and Allan Joseph Bankman as “Bankman.” It requests the court to compel the return of any assets or payments made by the company to the parents in the past, along with punitive damages for their alleged “conscious, willful, wanton, and malicious conduct.”
The Filing Alleges:
“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.”
Furthermore, the complaint claims that Bankman, with his knowledge of tax law and deep understanding of the company’s complex corporate structure, facilitated a $10 million cash gift to himself and Fried, which was sourced from Alameda Ltd. funds.
“Bankman and Fried deployed their decades of experience as sophisticated law professors and veneer of legitimacy not to help the FTX Group, but rather to plunder it in order to enrich themselves and their pet causes.”
The filing also alleges that Bankman assisted other FTX insiders in using company funds for donations and covering up a whistleblower complaint from September 2019.
Barbara Fried is accused of playing a central role in SBF’s political contributions strategy, benefiting Mind the Gap (MTG), an independent expenditure-only political action committee she co-founded and chaired. The filing suggests that tens of millions of dollars were directed to MTG at her request.
While the specific amounts allegedly misappropriated by Bankman and Fried are not detailed in the filing, it suggests that either or both of them may have expensed luxury items such as $1,200-per-night hotel stays, plane tickets, and salaries.
Bankman received a significant annual salary for his role as a senior adviser to the FTX foundation, along with sizable property and donation sums. The filing also mentions Bankman’s involvement in a last-minute attempt to sell FTX to Binance in November 2022.
Conclusion
Sam Bankman-Fried, the central figure in the case, remains in custody as he prepares for an upcoming trial. Spokespeople for Bankman and Fried have yet to comment on the lawsuit.
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