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FTX has sued the parents of Sam Bankman-Fried, claiming they enriched themselves by siphoning off millions of dollars from the cryptocurrency exchange their son founded.
In a court filing late on Monday evening, the FTX debtors said Joseph Bankman and Barbara Fried, both of whom are tenured professors at Stanford Law School, used their influence to funnel money from the business to their pet charitable causes.
Bankman, a tax lawyer, also lavished gifts upon his friends and family using FTX funds, they alleged, including, in one instance, flights and tickets to the F1 Grand Prix in France.
Fried used her influence to obtain millions of dollars in donations from Bankman-Fried and an associate for Mind the Gap, a so-called super Pac she co-founded to help Democrats win office in the 2020 US election cycle. She further pressured “certain FTX Insiders to unlawfully avoid (if not violate) federal campaign finance law”, the debtors alleged, by circumventing disclosure requirements.
Bankman-Fried, who was arrested last December after FTX collapsed with a multibillion-dollar hole in its balance sheet, has previously asserted that his parents “weren’t involved in any of the relevant parts” of the business. They have not been charged with a crime.
But lawyers for the FTX debtors said the truth was that “Bankman and Fried were very much involved — from the founding of the FTX Group until its collapse”.
“As early as 2018, Bankman described Alameda as a ‘family business’ — a phrase he repeatedly used to refer to the FTX Group,” they added. Alameda Research was FTX’s affiliated hedge fund.
Even as FTX was rapidly descending into insolvency last year, Bankman and Fried “discussed with Bankman-Fried the transfer to them of a $10mn cash gift and a $16.4mn luxury property in The Bahamas”, the debtors alleged.
A spokesperson for Bankman and Fried did not respond to a request for comment.
Bankman-Fried is currently incarcerated awaiting an October trial over several criminal charges. Earlier this month, former FTX executive Ryan Salame, who had become a Republican megadonor in the 2022 midterms, pleaded guilty to conspiring to make unlawful political contributions and conspiring to operate an unlicensed money transmitting business.
He became the fourth member of Bankman-Fried’s inner circle to reach a deal with prosecutors, after Gary Wang, Caroline Ellison and Nishad Singh entered guilty pleas.
While prosecutors have not to date charged Bankman-Fried’s parents, the FTX debtors claimed they “either knew — or ignored bright red flags revealing — that their son . . . and other FTX Insiders were orchestrating a vast fraudulent scheme”.
Source: Financial Times