Bankrupt cryptocurrency exchange FTX wants to recover luxury properties and “millions of dollars in fraudulently transferred and embezzled funds” from the parents of Sam Bankman-Fried, the exchange’s disgraced ex-CEO and founder.
In a lawsuit Monday, attorneys representing the bankrupt estate of the failed stock exchange alleged that Allan Joseph Bankman and his wife, Barbara Fried, “exploited their access and influence within the FTX company to enrich themselves, directly and indirectly, by millions of dollars . “
The lawsuit, filed in a U.S. District Court in Delaware, further alleges that Bankman and Fried, “despite knowing or blatantly ignoring that the FTX Group was insolvent or on the verge of insolvency,” negotiated with their son the transfer of discussed a bank. A $10 million cash gift and a $16.4 million luxury property in the Bahamas.
The lawsuit goes on to allege that as early as 2019, Sam’s father directly participated in efforts to cover up a whistleblower complaint that threatened to “expose the FTX Group as a house of cards.” The filing also includes details of emails written by Bankman in which he complained to the FTX’s US chief administrative officer that his annual salary was $200,000 when he was “supposed to be paid $1 million a year”.
That complaint was ultimately submitted to his son in an email, according to the lawsuit: “Gosh, Sam, I don’t know what to say here. This is the first [I] heard of the 200,000 per year salary! I’m putting Barbara on this.”
The filing characterizes correspondence in which Bankman lobbies his son to “vastly increase his own salary.” Within two weeks, the lawsuit alleges that Bankman-Fried had given his parents a combined $10 million in Alameda money, and within three months the couple took ownership of the $16.4 million property in the Bahamas.
According to the partially redacted filing, Bankman-Fried’s parents also pushed for tens of millions of dollars in political and charitable contributions, including to Stanford University, that were ostensibly intended to boost Bankman and Fried’s professional and social status. Fried is also accused of encouraging her son and others within the company to avoid or even violate federal campaign finance disclosure rules by “engaging in straw donations or otherwise identifying the FTX Group as a source of to hide the contributions.”
Bankman-Fried’s parents are legal scholars who taught at Stanford Law School. His mother is an expert in ethics, while his father specializes in taxes. Bankman-Fried itself is independently facing multiple charges of fraud and securities fraud in connection with the alleged multi-billion dollar FTX fraud.
Federal prosecutors and regulators allege that Bankman-Fried masterminded “one of the largest financial frauds in American history,” in the words of U.S. Attorney Damian Williams. The Justice Department has accused the former FTX CEO of using billions of dollars of client money to fund venture capital investments, purchase real estate and make political donations. Bankman-Fried has denied pleading guilty to all charges, and his criminal trial is set to begin on October 3 in Manhattan.
Bankman and Fried “either knew – or ignored the glaring red flags that revealed – that their son, Bankman-Fried, and other FTX Insiders were orchestrating a major fraudulent scheme,” the lawsuit said.
FTX’s new leadership team has spent months trying to recover billions of dollars in missing assets from the digital asset exchange.
The stock exchange’s lawsuit against Bankman-Fried’s parents asks for a mix of compensatory relief, including damages resulting from Bankman and Fried’s “knowing, intentional, wanton and malicious conduct,” as well as the return of property or payments to the couple. from FTX. If a judge rules in favor of the bankrupt exchange, it is unclear how the recoveries could affect Bankman and Fried’s ability to pay their son’s legal fees as he appears in court next month.
Bankman and Fried’s legal counsel said in a written statement to CNBC that FTX’s filing on Tuesday “is a dangerous attempt to intimidate Joe and Barbara and undermine the jury trial just days before their child’s trial begins.” adding that “these claims are completely false. “
“Mr. Ray and his vast team of attorneys, who collectively rack up countless millions of dollars in fees while returning relatively little to FTX clients, know better,” the statement from Bankman and Fried’s attorneys continues.
Stanford University did not immediately respond to CNBC’s request for comment.