The ‘Family Business’ — FTX Founder’s Parents Accused of Siphoning Millions From Bankrupt Exchange
The parents of disgraced FTX founder Sam Bankman-Fried are being accused of misappropriating millions in customer funds from the now-bankrupt cryptocurrency exchange. The attorneys for Joseph Bankman and Barbara Fried firmly assert that the allegations are “completely false.”
FTX Scandal Widens: Bankman-Fried’s Parents Face Major Lawsuit
In a lawsuit filed on September 18, FTX debtors alleged Joseph Bankman and Barbara Fried exploited their status as insiders to enrich themselves through gifts, real estate, and donations to their favored causes. The accusations portray the couple as complicit in their son Sam Bankman-Fried’s (SBF) alleged fraud.
“Bankman recognized and took full advantage of his insider status, explaining in February 2021 that he was ‘very involved in the business,’” the court filing says. “Indeed, Bankman proudly touted that he was an early investor in Alameda—the proprietary trading arm of the FTX Group that its Insiders used to misappropriate billions of dollars in customer and investor funds.”
The court filing adds:
Given his background and positions, and the ear of his son Bankman-Fried, Bankman was well-placed to insist on and implement internal controls and raise alarms about the misconduct within the FTX Group. Bankman, instead, stayed silent and in at least one instance, helped hush a complainant whose allegations threatened to expose the fraud within the FTX Group.
The lawsuit claims Bankman and Fried together received a $10 million cash “gift” from FTX funds in early 2022. It also alleges the couple benefited from the purchase of a $16.4 million luxury property in the Bahamas using FTX customer funds.
“Bankman used his status as an insider to funnel vast sums of FTX Group money to his chosen causes, including his employer, Stanford University,” the lawsuit claims.
The ‘Family Business’
Meanwhile, the lawsuit portrays SBF’s mother, Barbara Fried, as the most influential advisor to her son regarding political contributions. It accuses her of allegedly encouraging unlawful donations intended to avoid disclosure laws.
“Fried, concerned with the optics of her son and his companies donating money to the organization she co-founded and other causes she supported, encouraged Bankman-Fried and others within the FTX Group to avoid (if not violate) federal campaign finance disclosure rules by engaging in straw donations or otherwise concealing the FTX Group as the source of the contributions,” the FTX estate alleges.
In total, FTX alleges Bankman and Fried siphoned “millions of dollars” out of the now-bankrupt exchange for personal gain. This includes lavish benefits like private jets, $1,200-a-night hotel rooms, and even a Super Bowl commercial appearance.
The lawsuit brings claims of fraudulent transfers, breach of fiduciary duty, aiding and abetting fraud, unjust enrichment, and other counts against the couple. It seeks to recover misappropriated funds and deny any bankruptcy claims filed by Bankman or Fried.
Sean Hecker and Michael Tremonte, counsel for Bankman and Fried, vehemently deny the accusations. “This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins. These claims are completely false,” Hecker stated in an editorial featured by The Block.
The allegations add to the legal troubles surrounding the FTX collapse, which has spawned investigations and lawsuits targeting Bankman-Fried, executives, advisors and others connected to the firm. Bankman-Fried himself faces criminal charges over the alleged fraud.
What do you think about the lawsuit against SBF’s parents? Share your thoughts and opinions about this subject in the comments section below.