FTX sues Bankman-Fried’s parents over ‘misappropriated funds’


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FTX has sued the parents of Sam Bankman-Fried, claiming they enriched themselves by siphoning off millions of dollars in “fraudulently transferred and misappropriated funds” from the cryptocurrency exchange their son founded.

In a court filing late on Monday evening, the FTX debtors said Joseph Bankman and Barbara Fried, both of whom are tenured professors at Stanford Law School, used their influence to funnel money from the business to their pet charitable causes.

Bankman, a tax lawyer, also lavished gifts upon his friends and family using FTX funds, they alleged, including, in one instance, flights and tickets to the Formula One Grand Prix in France.

Fried used her influence to obtain millions of dollars in donations from Bankman-Fried and an associate for Mind the Gap, a so-called super Pac she co-founded to help Democrats win office in the 2020 US election cycle. She further pressured “certain FTX Insiders to unlawfully avoid (if not violate) federal campaign finance law”, the debtors alleged, by circumventing disclosure requirements.

Bankman-Fried, who was arrested last December after FTX collapsed with a multibillion-dollar hole in its balance sheet, has previously asserted that his parents “weren’t involved in any of the relevant parts” of the business. They have not been charged with a crime.

But lawyers for the FTX debtors, who have been attempting to recoup funds from individuals and entities related to the defunct exchange, said the truth was that “Bankman and Fried were very much involved — from the founding of the FTX Group until its collapse”. 

“As early as 2018, Bankman described Alameda as a ‘family business’ — a phrase he repeatedly used to refer to the FTX Group,” they added. Alameda Research was FTX’s affiliated hedge fund.

Even as FTX was rapidly descending into insolvency last year, Bankman and Fried “discussed with Bankman-Fried the transfer to them of a $10mn cash gift and a $16.4mn luxury property in the Bahamas”, the debtors alleged.

In a joint statement, Bankman and Fried’s lawyers said: “This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins.”

They added that the FTX debtors’ claims were “completely false”.

Bankman-Fried is currently incarcerated awaiting an October trial over several criminal charges. Earlier this month, former FTX executive Ryan Salame, who had become a Republican megadonor in the 2022 midterms, pleaded guilty to conspiring to make unlawful political contributions and conspiring to operate an unlicensed money-transmitting business. 

He became the fourth member of Bankman-Fried’s inner circle to reach a deal with prosecutors, after Gary Wang, Caroline Ellison and Nishad Singh entered guilty pleas. 

While prosecutors have not to date charged Bankman-Fried’s parents, the FTX debtors claimed they “either knew — or ignored bright red flags revealing — that their son . . . and other FTX insiders were orchestrating a vast fraudulent scheme”.

Separately on Tuesday, a federal appeals court in New York heard arguments from lawyers for Bankman-Fried, who claim he was unlawfully incarcerated last month following an alleged attempt to intimidate witnesses by providing details of his relationship with Ellison to The New York Times.

Mark Cohen, who represents Bankman-Fried, said his client was unable to properly prepare for trial and that arrangements by the government for him to access an internet-enabled laptop were “not happening” because the connection was “so slow as to be meaningless”.

The panel seemed unsympathetic. “At a certain point, he makes his own bed, he sleeps in it,” Judge William Nardini said. It is expected to issue its ruling later.

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Lisa Holden
Lisa Holden
Lisa Holden is a news writer for LinkDaddy News. She writes health, sport, tech, and more. Some of her favorite topics include the latest trends in fitness and wellness, the best ways to use technology to improve your life, and the latest developments in medical research.

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