FTX sues founder Bankman-Fried’s parents

TheMorningCrypto Desk
TheMorningCrypto Desk Published on September 19, 2023 09:12 PM

FTX, a cryptocurrency exchange that has filed for bankruptcy, initiated a lawsuit against the parents of its founder, Sam Bankman-Fried, on Monday.

FTX sues founder Bankman-Fried’s parents
Source: Medium

The lawsuit alleges that Joseph Bankman and Barbara Fried, who are both Stanford professors, leveraged the company to benefit themselves financially to the detriment of FTX's customers.

Under the leadership of turnaround expert John Ray, FTX has asserted that its founder, Sam Bankman-Fried, operated the exchange as a "family enterprise."

It is alleged that Sam misused billions of dollars in customer funds for the advantage of a select group of individuals, including his parents. Sam Bankman-Fried has pleaded not guilty to charges that he defrauded FTX customers by using their funds to prop up his risky investments.

FTX Sues Sam Bankman's Parents Over Misappropriated Funds

The managers of bankrupt crypto exchange FTX sued the parents of co-founder and former Chief Executive Officer Sam Bankman-Fried to recover millions of dollars in fraudulently transferred and misappropriated funds.

In a court filing on Monday, FTX claimed that Allan Joseph Bankman and Barbara Fried allegedly took advantage of their access and influence within the company to financially benefit themselves, both directly and indirectly, to the tune of millions of dollars. This alleged enrichment occurred to the detriment of the company's debtors and creditors.

Bankman and Fried’s attorneys, Sean Hecker and Michael Tremonte said in a joint statement that FTX’s claims were completely false and that the new lawsuit was a waste of funds that could be returned to FTX customers. This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins, Hecker and Tremonte said.

FTX's legal action alleges that Bankman and Fried accepted significant benefits from the company, including a $10 million cash gift and a $16.4 million luxury property in the Bahamas, despite FTX facing financial instability. Additionally, they reportedly encouraged FTX to make substantial charitable contributions, including donations to Stanford University, among others.

Bankman-Fried's father, a tax specialist at Stanford Law School, often portrayed himself as the responsible figure in a company led by his 31-year-old son and other executives lacking extensive management experience. However, the lawsuit claims that he remained silent and took limited action when he observed warning signs of fraud, failing to prevent FTX's leadership from allegedly misusing customer funds.

Fried, on the other hand, exerted significant influence over FTX's political contributions, leading Bankman-Fried and other executives to contribute millions of dollars directly to a political action committee she co-founded, as asserted by FTX.


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