FTX filed a fresh lawsuit against former CEO Sam Bankman-Fried (SBF) and his close associates. It is looking to recover over $1 billion in misappropriated funds.
The lawsuit lists:
- Former co-founder SBF
- Chief technology officer Zixiao “Gary” Wang
- Former Alameda head Caroline Ellison
- FTX’s former Director of Engineering Nishad Singh
The lawsuit claims that they failed in their fiduciary duties while at the helm, causing the eventual collapse of the cryptocurrency exchange.
FTX alleges that Bankman-Fried and his associates failed to maintain robust financial records. They allegedly carried out various transfers and expenses unchecked and also obfuscated their illegal activities.
FTX said these transfers were made when the exchange and its subsidiaries were insolvent, claiming they were aware of the failing financial situation.
Part of the numerous transfers and transactions listed in the lawsuit include previously mentioned political donations worth $100 million. Also, the defendants used more than $500 million to acquire Robinhood shares, confiscated by government officials.
One of the people mentioned in the lawsuit, former Alameda Research CEO Caroline Ellison, allegedly paid herself $22.5 million in bonuses, with $10 million invested in an artificial intelligence company. Another bonus was around $6.2 million.
Wang and Singh also benefited from the illegal transfers at FTX. The complaint claims that all persons listed as defendants used co-mingled user funds worth over $243 million to purchase luxury properties for themselves, their families, and friends. FTX alleged these actions further plunged the crypto exchange debt worth billions of dollars.
The lawsuit also noted the absence of information security or cybersecurity personnel to protect the company, associated entities, and customer funds against fraud and hackers.
“Defendants used their close control over the FTX Group’s businesses and systems to perpetrate massive fraud — squandering the FTX Group’s assets on, among other things, luxury homes, political and “charitable” contributions, and various investments that would inure to the benefit of defendants rather than the corporate entities that had paid for them.”Excerpt from FTX lawsuit
SBF’s father allegedly involved
Further allegations stated that Bankman-Fried transferred $10 million from his account on FTX to his father, Joseph Bankman, a law professor at Stanford Law School. It was labeled as a gift. The lawsuit claims that SBF’s father uses part of the “gift money” to fund his son’s criminal defense.
While Wang, Ellison, and Singh have pleaded guilty to charges leveled against them, Bankman-Fried has pleaded not guilty to criminal charges.
The recent lawsuit is part of an ongoing effort by CEO John J. Ray III to recover misappropriated funds. FTX, under John Ray’s leadership, previously recovered $7 billion owed to creditors and is recently looking to recoup more than $70 million invested in various life science companies by the Bahamas-based Latano science fund and FTX Foundation.