Bankrupt cryptocurrency exchange FTX and its affiliated entities are suing Joseph Bankman and Barbara Fried, the parents of Sam Bankman-Fried (SBF), the company’s disgraced founder and former CEO, for breach of duty of fiduciary and execution of fraudulent transfers leading to unjust enrichment.
According to a Monday filing in the United States Bankruptcy Court for the District of Delaware, FTX seeks to recover millions of dollars fraudulently transferred and misappropriated by SBF’s parents.
FTX follows SBF Parents
In the complaint, FTX accused Bankman and Fried of taking advantage of their access and influence within the bankruptcy estate to promote themselves at the expense of the business’s debtors. While the company presents itself to investors and the public as a sophisticated group of crypto exchanges and businesses, it is run as a family business fueled by fraud to benefit a group of insiders.
Bankman and Fried, both professors at Stanford Law School, played key roles in perpetuating the culture of misrepresentations and gross mismanagement at FTX. They helped cover up allegations that would have exposed FTX’s fraudulent activities. SBF’s father helped the company’s management evade taxes because of his deep understanding of tax law.
“Given his background and positions, and the ear of his son Bankman-Fried, Bankman is well placed to insist on and enforce internal controls and raise alarms about misconduct within FTX Group. Bankman, in turn, remained silent and, on at least one occasion, helped to silence a complainant whose allegations threatened to expose fraud within the FTX Group,” the plaintiffs said.
On the other hand, Fried is responsible for SBF’s political contribution strategy. He encouraged his son and other insiders to circumvent federal campaign finance disclosure rules by participating in straw donations and hiding that the FTX group was the source of the contributions.
Plaintiffs Seek Damages and Torts
Because of their roles in the fraudulent management of FTX, Bankman and Fried enjoyed numerous benefits, including $1,200-a-night hotel stays, cash gifts, luxury properties worth tens of million dollars, plane tickets, and salaries. They also facilitated millions in donations to Stanford University to improve their professional and social status.
FTX charged SBF’s parents with 12 counts of allegations, including fraudulent transfers, unjust enrichment, and breaches of fiduciary duties. The plaintiffs are seeking damages to be determined at trial and disgorgement of all fees paid to the defendants.
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