Sam Bankman-Fried has recently filed a lawsuit against his insurance provider, CNA, also known as the Continental Casualty Company. The suit accuses CNA of failing to honor his insurance claims for legal defense costs. However, this suit is just one component in a multifaceted legal landscape surrounding Bankman-Fried and his businesses.
According to court documents, CNA has not met its obligation to pay for Bankman-Fried’s legal expenses. The legal complaint states that CNA’s alleged breaches “have caused, and threaten to cause, substantial and irreparable harm” to Bankman-Fried. The policy in question has a liability limit of $5 million, activated only after an initial $10 million policy is exhausted. Additionally, Bankman-Fried was released on a $250 million bail bond co-signed by family and friends after his arrest last December.
Tangled web of insurance policies and pending lawsuits
Bankman-Fried’s lawsuit was filed in the District Court of Northern California, alleging that Continental Casualty had provided D&O (Directors and Officers) insurance to Paper Bird and its subsidiary, FTX Trading. It is important to know that when it comes to corporate insurance, D&O policies often operate in layers. For Bankman-Fried, his primary D&O insurance, provided by Beazley and QBE, covers $10 million of his legal costs. Consequently, Continental Casualty’s policy was supposed to kick in with an additional $5 million.
The filing also notes that Beazley and QBE have already paid for his legal defense per their policy terms. The suit demands that Continental Casualty adhere to its contractual obligations and cover his legal costs and related damages. Besides these insurers, another layer of D&O coverage exists, provided by Hiscox Syndicates. Hiscox has initiated an interpleader action involving multiple insured persons, including Bankman-Fried, to determine the fair disbursement of policy funds.
Bankman-Fried, wholly owning Paper Bird, had sought to use D&O insurance payments under a policy issued to West Realm Shires, popularly known as FTX US. This move was countered by FTX’s lawyers and blocked by the U.S. Bankruptcy Court for the District of Delaware.
As the Manhattan-based fraud trial against Bankman-Fried gains momentum, the parallel legal entanglement with his insurance provider adds a complex layer to an already intricate situation. All eyes are now focused on how these multiple threads will unravel in both the criminal and civil courts.
