Bankrupt cryptocurrency exchange FTX has initiated legal proceedings against the parents of its co-founder, Sam Bankman-Fried, alleging that they misused company funds for personal gain.
FTX's Accusation - “A Family Business”
Under the new leadership of CEO John Jay Ray III, FTX has taken legal action against Joseph Bankman and Barbara Fried, who are not only Sam Bankman-Fried's parents but also longtime professors at Stanford Law School. The lawsuit accuses the couple of benefiting from the company's funds through gifts and donations.
According to CEO John Jay, who is a turnaround specialist, the cryptocurrency firm was essentially being operated as a "family business," where Bankman-Fried used millions of dollars of customer funds for the benefit of a select group of insiders, including his parents.
The lawsuit asserts,
"As Bankman-Fried’s parents, Bankman and Fried exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars. Despite presenting itself to investors and the public as a sophisticated group of cryptocurrency exchanges and businesses, the FTX Group was a self-described ‘family business."
The Gifts And Donations
The two Stanford professors, Joseph Bankman and Barbara Fried, are accused of receiving a $10 million gift and a $16.4 million luxury home in the Bahamas, where FTX was headquartered. These transactions allegedly occurred despite their awareness of the precarious financial situation of the FTX Group.
The lawsuit asserts that Barbara Fried wielded considerable influence over FTX's political contributions. Furthermore, the lawsuit claims the couple advocated for significant company funds to be allocated for political and charitable purposes, including donations to Stanford and to the leftwing super PAC, Mind the Gap, co-founded by Fried.
FTX also alleges that Joseph Bankman was complicit in covering up mismanagement and fraud within the company. Despite positioning himself as the responsible adult in a room filled with inexperienced executives, Bankman is accused of failing to address fraudulent activities.
Response From Spokesperson
Joseph Bankman and Barbara Fried have not publicly commented on the lawsuit. However, in a previous statement to The New York Times, a spokesperson mentioned that Bankman had primarily focused on identifying worthy health-related charities during his 11-month tenure at FTX.
Attorneys Sean Hecker and Michael Tremonte, who represent Bankman and Fried, issued a joint statement refuting FTX's claims. They labeled the lawsuit as "completely false" and criticized it as an attempt to intimidate their clients and disrupt the upcoming trial of their child, Sam Bankman-Fried.
FTX's Recovery Efforts
FTX has been actively recovering assets to repay customers, successfully retrieving over $7 billion. The company is continuing its pursuit of further recoveries through legal action against FTX insiders and other individuals who received funds before the company's bankruptcy.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
