The insolvent FTX Derivatives Exchange has taken legal action by initiating a lawsuit against Joseph Bankman and Barbara Fried, the parents of the exchange’s founder and former CEO, Sam Bankman-Fried (SBF).
The Embedded Allegations on The FTX Case
In a formal court filing, the trading platform has leveled fraud accusations against Bankman and Fried, who hold esteemed positions as law professors. Per the filing, the exchange’s aim is to reclaim funds that were purportedly moved and mishandled in a fraudulent manner.
The exchange’s decision to sue its founder’s parents underscores the severity of the alleged financial improprieties and has raised serious concerns among FTX stakeholders, prompting them to explore all available avenues to recover these allegedly ill-gotten funds.
Also, the court document revealed that both parties who have enjoyed distinguished careers in academia had a hand in the misallocation of substantial sums of money, which were entrusted to the exchange for safekeeping and legitimate trading purposes.
Bankman’s background as a tax law expert and his close relationship with his son, enabled him to be fully part of the exchange, while he took several decisions in his favor. The claims also noted that he used his status as an insider to divert some of the exchange’s money to his personal account.
Despite knowing the challenges the insolvent exchange was facing, Bankman and Fried got about $10 million in cash from SBF and a luxury property in the Bahamas worth about $16.4 million. The duo also pushed for tens of millions of dollars in political and charitable contributions, so as to boost their financial and social status at the expense of the exchange.
As such, FTX in the filing is asking the court to compel both parents to return every funds they have received either in the form of property or cash gifts that may have been given to them via the exchange.
More Troubles for Bankman-Fried and FTX
Recall that the 31-year-old entrepreneur who is already facing fraud charges and mismanagement of funds was accused of conspiring to pay a sum of approximately $40 million to Chinese government officials. It was believed that the main reason for doing so was to convince the Chinese authorities to unfreeze Alameda Research’s accounts which hold more than $1 billion in assets.
Meanwhile, prosecutors have vehemently opposed the dismissal of charges against the embattled founder asserting that the criminal charges brought against him hold significant weight and should not be dismissed on procedural grounds.