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FTX, the bankrupt cryptocurrency exchange, has sued its founder Sam Bankman-Fried and three other former executives to claw back more than $1bn they allegedly misappropriated in the months leading up to its collapse last year.
The lawsuit — filed by FTX under the direction of an executive team led by restructuring expert John Ray — takes aim at a litany of share awards, real estate purchases, cash transfers and other transactions that the company says should be reversed under bankruptcy law.
Among the alleged beneficiaries of the transactions described in the lawsuit are Caroline Ellison, the former head of FTX’s trading arm Alameda Research. In one incident listed in the complaint, Ellison allegedly paid herself a bonus of $22.5mn, part of which was later transferred to a personal bank account and subsequently used to invest millions of dollars in a company focused on artificial intelligence research.
Zixiao “Gary” Wang, a co-founder of FTX, and Nishad Singh, who worked at FTX and Alameda, are also named in the complaint as beneficiaries of allegedly illicit transfers.
Ellison, Wang and Singh have pleaded guilty to charges including fraud in criminal cases unrelated to Thursday’s lawsuit. Bankman-Fried has pleaded not guilty to US criminal charges including fraud, money laundering and campaign finance violations.
Thursday’s FTX lawsuit opens a new front in Ray’s efforts to reclaim assets that he says rightfully belong to creditors of the crypto exchange. Among them are thousands of individual customers who lost access to their assets when FTX suspended withdrawals last year.
The company filed for bankruptcy in November. Soon afterwards Ray, who previously oversaw the liquidation of Enron, stated that he had never before seen “such a complete failure of corporate controls and such a complete absence of trustworthy financial information”.
Many of the failings that Ray identified then play a central role in the lawsuit filed in Delaware bankruptcy court.
FTX entities “did not prepare financial statements of any kind”, according to the complaint, while others relied on QuickBooks, an accounting software package intended for small businesses, or “a hodgepodge of Google documents, Slack communications, [and] shared drives”.
Lawyers for the defendants did not immediately return requests for comment.
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