Parents of Sam Bankman-Fried, the founder of the now-defunct FTX crypto exchange, are now facing legal action from the bankruptcy estate of FTX.
A lawsuit was filed against Joseph Bankman and Barbara Fried in order to recover millions of dollars in funds that were misappropriated and fraudulently transferred and taken by the couple.
The defendants in the said lawsuit have been named Bankman and Fried, respectively. Debtors of both Alameda Research and FTX are also seeking damages related to breach of fiduciary duty and other misconduct.
On Monday, a court filing was submitted that was about 63 pages long and accused the two defendants of using their influence and access within FTX to, directly and indirectly, enrich themselves.
It said that they had done so knowingly, thereby wronging the debtors involved in the bankruptcy matter as well as their creditors.
The filing was submitted in the District of Delaware. The former CEO of FTX and other individuals associated with the exchange have been accused of embezzling customer funds worth billions of dollars.
In fact, the FTX disaster has been referred to as one of the biggest fraud cases to have occurred in the history of the US.
The FTX founder is now facing criminal charges of money laundering and fraud, amongst others and he has pled not guilty.
His trial is scheduled to begin next month and he is currently preparing for it behind bars after his bail was revoked.
As early as 2018, Bankman-Fried used to refer to the FTX Group as a ‘family business’ and the document submitted provided insight into his use of this term.
As per the filing, even with FTX facing insolvency, the defendants continued to use the said ‘family business’ to make substantial profits.
The filing said that Joseph Bankman had played a crucial role in the gross mismanagement and misrepresentations and covered up allegations that would have otherwise exposed the fraud happening.
It further dictated that both Bankman and his wife had used millions of dollars siphoned from FTX to support their own pet causes and for their personal benefit.
Both professors at Stanford Law School, Bankman and Fried purchased a luxurious property in The Bahamas in February last year, which was known as ‘Old Fort Bay’, or ‘Blue Water’.
According to the court filing, the 30,000 square-foot property was acquired for a cash payment of $19 million, which includes fees and taxes.
The two defendants had not made any personal contributions and the entire payment was sourced from the debtors.
It has also been alleged that Bankman had proudly claimed to be one of Alameda’s early investors, the trading company that misappropriated billions of dollars of FTX customers.
The filing further revealed that Bankman had received real estate and ‘gifts’ worth millions of dollars, had traveled on privately chartered jets, and charged hotel expenses of $1200 per night to the FTX group.
The parents were also accused of making charitable and political donations and contributions, including those made to Stanford University.
They had done so to boost their social and professional status, all of which was at the expense of FTX.