FTX Sues Sam Bankman-Fried And Other FTX Executives For $1 Billion
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The former CEO of the FTX cryptocurrency exchange, Sam Bankman-Fried, is being sued by the now-bankrupt crypto trading platform. The FTX exchange has filed the lawsuit in an attempt to recover over $1 billion worth of funds that were allegedly misappropriated by Bankman-Fried and other FTX executives.
Bankman-Fried and other FTX executives sued for $1 billion
On July 20, FTX filed a complaint with the US Bankruptcy Court. The defendants named in the lawsuit include Bankman-Fried, the former CEO of Alameda Research, Caroline Ellison, the co-founder of FTX Zixiao “Gary” Wang, and the former FTX engineering director Nishad Singh.
According to the lawsuit, FTX claimed that the former executives at the exchange failed to abide by their fiduciary duties by misappropriating customer funds on a periodical basis. The lawsuit claimed that these executives used customer funds to purchase luxury condominiums, make political and charitable contributions, speculate in investments, and handle other projects.
The lawsuit has also said that these former executives abused the control they had over FTX and other related companies. It noted that they worked together in committing one of the largest financial frauds that have ever been seen in history.
The plaintiff also claims that the defendants worked under a model where only a few employees were in charge of fiat and crypto transfers. These executives also held the power to hire and fire employees, and there was not much oversight over how they used their power.
The FTX exchange has also alleged that the former executives at the exchange granted themselves equity worth over $725 million, with the debtors not getting any value in exchange. The FTX exchange has also alleged that Bankman-Fried worked with Wang to misappropriate another $546 million to acquire shares on Robinhood.
The suit says that Ellison awarded herself $28.8 million worth of bonuses. She also used $10 million to purchase shares in a company supporting artificial intelligence. Bankman-Fried also sent $10 million to an account owned by his father on the exchange.
Bankman-Fried father reportedly made six transfers shortly after his son sent him money to his FTX account. $6.75 million was withdrawn from his FTX account and transferred to accounts at TD Ameritrade and Morgan Stanley. According to FTX, the $10 million is being used to fund the legal defense of Bankman-Fried.
Fraudulent transactions happened when exchange was insolvent
FTX has said that the majority of the fraudulent transfers happened when the exchange was insolvent. The FTX exchange, under the leadership of Bankman-Fried, is believed to have changed the guidelines around negative balances, pointing to financial woes. The change allowed FTX to continue operating despite having large deficits.
“In or around July 2019, Bankman-Fried directed one or more of his co-conspirators or individuals working at their behest to modify the software to permit Alameda to maintain a negative balance in its account on the exchange,” the lawsuit claimed.
