Sam Bankman-Fried’s Parents Request Dismissal of Clawback Lawsuit

Jimmy Aki
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The parents of FTX founder Sam Bankman-Fried have asked a U.S. bankruptcy judge to dismiss the lawsuit initiated by the crypto exchange against them. They deny involvement in the company’s internal operations and refute allegations of withdrawing money from FTX during its collapse.

Attorneys Push for ‘Motion to Dismiss’ Due to Insufficient Evidence

In a court filing dated January 15, legal representatives for Joseph Bankman and Barbara Fried have contested the validity of FTX’s previous clawback litigation, asserting a lack of compelling evidence.

The attorneys argued that the presented evidence does not establish the parents’ control over the company or awareness of the circumstances leading to its bankruptcy.

The lawyers emphasized that presenting mere conclusory allegations is insufficient to establish a plausible claim for relief. Furthermore, they argued that for the court to reasonably infer the defendants’ guilt in the alleged misconduct, the complaint must provide a substantial factual basis.

Sam Bankman

As a result, the legal team contended that the claims against Mr. Bankman and Ms. Fried should be dismissed under Federal Rule of Civil Procedure 12(b)(6) and Federal Rule of Bankruptcy Procedure 7012(b) due to a failure to state a claim.

This legal development stems from FTX clawback litigation on September 18, 2023, against Bankman-Fried’s parents for allegedly exploiting and enriching themselves with their son’s stolen funds.

According to the legal action filed in the federal court of Delaware, the parents of the defunct exchange founder were implicated in the embezzlement of investors’ funds.

FTX’s legal team revealed that Mr. Bankman and Ms. Fried, both professors at Stanford Law School, received a $10 million cash gift and a $16.4 million luxurious home in the Bahamas from their son.

The lawsuit claimed that Mr. Bankman used his legal knowledge to cover the exchange lawyer’s complaints about his son’s fraudulent business. These complaints ranged from monetary laundering to asset price manipulations, and instead of addressing them, Mr. Bankman recommended investigating the lawyer.

Meanwhile, Ms. Fried was accused of complicating the fraud. Although not officially employed by FTX, she allegedly coached her son and undisclosed exchange executives to evade all disclosure requirements for political contributions.

However, the recent “Motion to Dismiss” filing argued that the luxurious property in the Bahamas served as a shared FTX accommodation, not their exclusive residence. SBF’s parents also denied involvement and noted their lack of knowledge regarding the source and structure of FTX’s donations.

The Backdrop of FTX Bankruptcy

FTX initiated Chapter 11 bankruptcy proceedings on November 11, 2022, following the conviction of its founder for fraud and conspiracy.

Despite facing these legal challenges, FTX has actively undertaken clawback initiatives, seeking to recover assets from former insiders and partners to compensate defrauded customers.

The defunct platform appointed a new management team, which was pivotal in recovering lost funds. Specifically, John Jay Ray III was appointed to trace the missing funds of the bankrupt FTX exchange.

Under Ray’s leadership, the new management released a second interim investigation report on June 26, detailing the recovery of $7 billion in liquidated assets.

However, in response to the ongoing legal actions, FTX has refrained from commenting on the recent motion for dismissal filed by Sam Bankman-Fried’s parents.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.