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<\/p>\nDebtors of the bankrupt cryptocurrency exchange FTX have launched legal action against the parents of FTX founder Sam \u201cSBF\u201d Bankman-Fried, alleging that they misappropriated millions of dollars through their involvement in the exchange\u2019s business.<\/p>\n
The counsel for FTX debtors and debtors-in-possession, represented by the law firm Sullivan & Cromwell,\u00a0filed a lawsuit against SBF\u2019s parents, Joseph Bankman and Barbara Fried, on Sept. 18.<\/p>\n
The plaintiffs argued that Bankman and Fried exploited their access and influence within the FTX empire to enrich themselves at the expense of the debtors in the FTX bankruptcy estate. The debtors alleged that SBF\u2019s parents were \u201cvery much involved\u201d in the FTX business from inception to collapse, contrary to what SBF has claimed.<\/p>\n
\u201cAs early as 2018, Bankman described Alameda as a \u2018family business\u2019 \u2014 a phrase he repeatedly used to refer to the FTX Group. Even as the FTX Group descended into insolvency, Bankman and Fried profited handsomely from this \u2018family business,\u2019\u201d the complaint reads.<\/p>\n
According to the plaintiffs, SBF\u2019s father, a Stanford Law School professor, had broad authority to make decisions for FTX Group as its \u201cde facto officer.\u201d Bankman also held executive positions on FTX Group\u2019s management team, the debtors argued.<\/p>\n
SBF\u2019s mother, also a Stanford Law School professor, was actively involved in FTX\u2019s political donations, the plaintiffs wrote. According to the allegations, Fried served as the \u201csingle most influential advisor\u201d in FTX Group\u2019s political contributions, repeatedly calling upon FTX to donate millions directly to Mind the Gap (MTG), a political action committee that she co-founded.<\/p>\n
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According to the complaint, Bankman and Fried extracted significant unearned rewards from their involvement in FTX Group, including a $10-million cash gift and a $16.4-million luxury property in the Bahamas. Bankman also siphoned off FTX Group\u2019s money to cover costs, including privately chartered jets and $1,200-per-night hotel stays, the plaintiffs alleged.<\/p>\n
Related: <\/em><\/strong>FTX bolsters claims portal security measures following cyber breach<\/em><\/strong><\/p>\n By draining FTX Group\u2019s funds to their benefit, Bankman and Fried either knew or ignored red flags revealing that their son was orchestrating a fraudulent scheme to promote their personal and charitable interests at the debtors\u2019 cost, the plaintiffs said. The debtors called on the court to hold Bankman and Fried accountable for their misconduct and recover assets for the debtors\u2019 creditors, stating:<\/p>\n \u201cAward plaintiffs punitive damages in an amount to be determined at trial resulting from defendants\u2019 conscious, willful, wanton, and malicious conduct, which exhibits a reckless disregard for the interests of plaintiffs and their creditors.\u201d<\/p><\/blockquote>\n As previously reported, Bankman and Fried began\u00a0facing professional issues at Stanford Law School soon after FTX collapsed. In late 2022, SBF\u2019s parents also reportedly told friends that their son\u2019s legal bills would likely wipe them out financially.<\/p>\n Once a major cryptocurrency exchange, FTX stopped operating and filed for Chapter 11 bankruptcy in mid-November 2022. FTX founder and former CEO SBF was subsequently arrested and charged with 13 counts, including fraud, money laundering and bribing officials. SBF\u2019s first of two trials is scheduled to start on Oct. 3, where he will face seven charges related to fraudulent activities involving user funds at FTX and Alameda Research.<\/p>\n