FTX Files Lawsuit Against Sam Bankman-Fried’s Parents for Alleged Financial Misappropriation

FTX has initiated legal proceedings against Joseph Bankman and Barbara Fried, the parents of its founder and former CEO, Sam Bankman-Fried. FTX has accused the duo of engaging in financial improprieties that allegedly cost the exchange millions of dollars. This development, revealed in a court filing on Monday, marks another chapter in the ongoing saga of FTX’s troubles.

The court filing, albeit heavily redacted in parts, leaves no room for ambiguity about FTX’s intentions. The exchange is seeking the recovery of “millions of dollars in fraudulently transferred and misappropriated funds” from Joseph Bankman and Barbara Fried. The lawsuit requests the court to grant the FTX estate damages, the return of any property or payments made to the parents by FTX in the past, and punitive damages due to what it describes as “conscious, willful, wanton, and malicious conduct.”

One of the key allegations outlined in the filing revolves around a substantial payment made by FTX to Blue Water, a company linked to Bankman and Fried. According to the documents, FTX Trading disbursed a total of $18,914,327.82, inclusive of taxes, fees, and costs, to Blue Water. The founders purportedly received title to this payment, along with expenses related to Blue Water exceeding $90,000. The filing further contends that Bankman’s knowledge of tax law and his understanding of FTX Group’s intricate corporate structure enabled him to orchestrate the transfer of a $10 million cash gift to himself and Fried, funded by Alameda Ltd. funds.

Adding a layer of intrigue to this legal battle is the fact that both Joseph Bankman and Barbara Fried are renowned professors at Stanford Law School. The lawsuit asserts that Bankman played a significant role in facilitating the diversion of FTX group funds toward donations while allegedly aiding in concealing a whistleblower complaint dating back to September 2019.

Moreover, the court documents disclose that Barbara Fried played a pivotal role in Sam Bankman-Fried’s political contributions strategy, serving as the “point person.” They also indicate that she leveraged her influence to benefit MTG (Mind the Gap), an independent political action committee she co-founded in 2018 and led as President and Chair. Although the precise amount that Bankman and Fried are alleged to have misappropriated remains undisclosed, the filing does provide specific line items that raise questions about their expenditures, such as $1,200-per-night hotel stays, plane tickets, and salaries.

For instance, Bankman received an annual salary of $200,000 for his role as a senior adviser to the FTX Foundation, in addition to more than $18 million for the purchase of property in the Bahamas and $5.5 million in donations from FTX Group to Stanford University.

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