- FTX Trading sues founder Sam Bankman-Fried and former executives over alleged misappropriation before FTX’s bankruptcy.
- Fraudulent transfers involved financing luxury condos, political contributions, and speculative investments.
- FTX seeks to undo the transfers under U.S. bankruptcy code or Delaware law.
FTX Trading, the cryptocurrency exchange, has filed a lawsuit against its founder, Sam Bankman-Fried, and other former executives, seeking to recoup over $1 billion they allegedly misappropriated before FTX’s bankruptcy. The complaint, filed in Delaware bankruptcy court, accuses the defendants of engaging in “one of the largest financial frauds in history.“
The alleged financial misconduct spanned from February 2020 to November 2022, a period leading up to FTX’s Chapter 11 protection filing. According to FTX, the defendants diverted funds for personal gains, including financing luxury condominiums, political contributions, and speculative investments.
Among the named defendants are Caroline Ellison, who led Bankman-Fried’s Alameda Research hedge fund; former FTX technology chief Zixiao “Gary” Wang; and former FTX engineering director Nishad Singh. FTX contends that the fraudulent transfers can be “avoided” under the U.S. bankruptcy code or Delaware law.
Notably, the complaint alleges more than $725 million of equity was awarded to FTX and West Realm Shires, an entity controlled by Bankman-Fried, without any corresponding value. Additionally, Bankman-Fried and Wang are accused of misappropriating $546 million to purchase shares of Robinhood Markets, while Ellison used $28.8 million for personal bonuses.
Bankman-Fried has been called the mastermind behind FTX’s collapse by U.S. prosecutors and faces criminal charges. Ellison, Wang, and Singh have already pleaded guilty and agreed to cooperate with prosecutors.
FTX’s lawsuit aims to reclaim the misappropriated funds and address the alleged financial wrongdoing. This unfortunate incident adds to the ongoing legal battle surrounding the collapsed cryptocurrency exchange.
How will things unfold for these executives and what will be next for the firm? Time will tell. For now, the case is ongoing.