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Writer's pictureZang Langum

FTX Initiates Legal Action Against Sam Bankman-Fried's Parents to Recoup $26 Million in Gifts and As

The bankrupt cryptocurrency exchange, FTX, has taken legal action to recover lavish properties and what it claims to be "fraudulently transferred and misappropriated funds" from Allan Joseph Bankman and Barbara Fried, the parents of Sam Bankman-Fried, the disgraced former CEO and founder of the exchange.


In a court filing made on Monday, attorneys representing FTX's bankruptcy estate alleged that Bankman and Fried leveraged their connections and influence within the FTX enterprise to amass wealth, both directly and indirectly, amounting to millions of dollars.

The lawsuit, filed in the U.S. Bankruptcy Court for the District of Delaware, goes on to assert that despite being aware of or willfully disregarding the financial instability of the FTX Group, Bankman and Fried discussed transferring a $10 million cash gift and a $16.4 million luxury property in the Bahamas to their son.


The suit claims that as early as 2019, Sam's father actively participated in efforts to conceal a whistleblower complaint that posed a threat to exposing the FTX Group's precarious financial state. The lawsuit also reveals emails authored by Bankman in which he complained to the FTX U.S. Head of Administration about his annual salary being $200,000, whereas he believed it should have been $1 million per year.


According to the lawsuit, this email was a way for Bankman to press his son into significantly increasing his own salary. Within a short span, the suit alleges that Bankman-Fried gifted his parents $10 million, sourced from Alameda, and within three months, they were deeded the $16.4 million Bahamian property.


The filing also suggests that Bankman-Fried's parents advocated for substantial political and charitable donations, including to Stanford University, with the intention of enhancing their professional and social standing.


Furthermore, Fried is accused of encouraging her son and others within the company to evade or violate federal campaign finance disclosure regulations by engaging in straw donations or concealing the FTX Group as the contributor.


Bankman-Fried's parents, who have backgrounds in legal scholarship, both taught at Stanford Law School, with his mother specializing in ethics and his father in tax law. Sam Bankman-Fried himself is facing multiple wire and securities fraud charges linked to the alleged multibillion-dollar FTX fraud.


Federal prosecutors and regulators assert that Bankman-Fried played a central role in what is described as "one of the largest financial frauds in American history," according to U.S. Attorney Damian Williams. The U.S. Department of Justice has accused the former FTX CEO of using customer funds amounting to billions of dollars to fund venture capital investments, acquire property, and make political donations. Bankman-Fried has pleaded not guilty to all charges, and his criminal trial is scheduled to commence on October 3rd in Manhattan.


The lawsuit contends that Bankman and Fried either had knowledge of or disregarded clear indicators that their son, along with other FTX insiders, was orchestrating an extensive fraudulent scheme.


FTX's new leadership team has been diligently working to recover the missing billions of dollars in assets belonging to the digital asset exchange.


FTX's lawsuit against Sam Bankman-Fried's parents seeks various forms of compensation, including punitive damages resulting from their alleged deliberate and malicious conduct, as well as the return of any assets or payments received from FTX. It remains uncertain how these clawbacks might impact Bankman and Fried's ability to cover their son's legal expenses as he approaches trial next month.


Legal representatives for Bankman and Fried issued a written statement, characterizing FTX's recent filing as a "dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins" and asserting that "these claims are completely false." They also criticized the substantial legal fees being incurred by Mr. Ray and his team of lawyers, which they claim are returning relatively little to FTX clients.







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