FTX, once a major cryptocurrency exchange, is at the center of a seething legal battle. Founders Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried, have been accused of extracting millions from the stricken enterprise, an allegation they vigorously deny.
These allegations have been brought forward by the debtors of the now-bankrupt exchange who assert that Bankman, a Stanford Law School professor and father to the FTX founder, functioned in the capacity of a de facto officer for FTX Group and had a significant decision-making role in the organization. They further claim that his wife, Barbara Fried, also a Stanford Law School professor, played a key part in FTX’s political contributions.
In a lawsuit filed by Sullivan Cromwell, the plaintiffs accused Bankman and Fried of creating sizable personal wealth through their involvement in FTX. They claim that the couple extracted substantial, unearned rewards, including a $10 million cash gift and a $16.4 million luxury property in the Bahamas. There were also mentions of costs, such as privately chartered jets and hotel stays worth $1,200 per night, being charged to FTX Group by the pair.
The plaintiffs further state that Bankman and Fried used their decades of experience and the veneer of legitimacy to not only take advantage of the FTX Group but also promote their personal and charitable interests with a disregard for the company’s costs. Their misconduct, it is argued, was either knowingly ignore red flags or an orchestrated fraudulent scheme organized by their son.
According to the court filing, the Bankmans reaped substantial benefits from FTX’s largesse, including more than $18 million for property in the Bahamas and $5.5 million in FTX Group donations to Stanford University. Additionally, the document alleges that Bankman was cognizant of the precarious financial condition of the FTX Group even as he starred in a Super Bowl spot and received millions from the crypto-exchange.
FTX, in a last-ditch effort, attempted to sell its operations to Binance with Bankman as part of the small group engaged in this endeavor. However, shortly after this attempt, FTX ceased its operations and filed for Chapter 11 bankruptcy.
Now incarcerated, Sam Bankman-Fried, founder and former CEO of FTX, was subsequently charged with 13 counts, including fraud, money laundering, and bribing officials. His trial is scheduled to commence on Oct. 3, where he will answer seven charges related to fraudulent activities involving user funds at FTX and Alameda Research.
While the events that transpired between FTX and its founders is a saddening chapter in the annals of crypto history, it serves as a potent reminder of the need for strict regulation and vigilant governance in the world of cryptocurrency. It encapsulates how quickly fortunes can change in this dynamic industry, and reinforces the importance of responsible financial management, especially for those at the helm.