Last Updated on: 22nd November 2023, 03:36 pm
FTX Crypto Collapse Leads to Legal Action Against Founder’s Parents
The parents of Sam Bankman-Fried, the founder of cryptocurrency exchange FTX, now face a lawsuit over their alleged involvement in the losses linked to the company’s collapse. Filed as part of a broader bankruptcy suit, the legal action accuses the couple of holding millions of dollars “fraudulently transferred” and of turning a blind eye to misconduct within FTX.
This action is brought on behalf of the millions of FTX customers who suffered financial losses when the crypto exchange collapsed in the previous year. The fall of the company had serious consequences, ultimately leading to the arrest of Sam Bankman-Fried, once hailed as the “King of Crypto,” who is currently awaiting trial on charges of illegally transferring millions from the exchange to cover losses at his trading firm, make political contributions, and acquire property. He vehemently denies these charges.
Attorneys representing Mr. Bankman-Fried’s parents have vehemently refuted the allegations, describing them as “completely false” and strategically aimed at undermining their son’s defense in the upcoming trial.
The legal action, an integral component of the broader bankruptcy proceedings, alleges that Mr. Bankman-Fried’s parents, both former professors at Stanford University, leveraged their “access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars.”
The lawsuit further reveals that they received a $10 million cash gift from funds associated with Alameda, an FTX partner company. Additionally, FTX reportedly granted them a $16.4 million property in the Bahamas.
FTX, once a dominant player in the global cryptocurrency trading landscape, held assets estimated at approximately $15 billion in 2021. However, the firm filed for bankruptcy last year after a sudden surge in customer withdrawal requests exposed a massive financial gap, potentially amounting to as much as $8 billion.
Managers representing the bankrupt firm allege that FTX was used as a “piggy bank” by Mr. Bankman-Fried and other “insiders,” and that his parents “contributed to or benefited from this fraudulent largesse.”
According to the legal filing, Allan Joseph Bankman, Mr. Bankman-Fried’s father and a specialist in US tax law, served as an adviser to FTX. He is accused of playing a pivotal role in perpetuating a culture of misrepresentation and gross mismanagement, as well as aiding in the concealment of allegations that could have exposed fraudulent activities. The lawsuit further asserts that he had luxury hotel stays costing $1,200 a night, and it cites messages in which he expressed dissatisfaction with a $200,000 salary, which he claimed should have been $1 million.
On the other hand, Barbara Fried, Mr. Bankman-Fried’s mother, is alleged to have been involved in directing her son’s political contributions, urging him to obscure their source.
Managers for FTX are now pursuing efforts to recover funds from Mr. Bankman-Fried’s parents. The downfall of Sam Bankman-Fried, a prominent figure in the cryptocurrency industry, has reverberated throughout the sector, intensifying regulatory scrutiny.
