Now-defunct cryptocurrency exchange FTX has filed a complaint against former CEO Sam Bankman-Fried and other key executives to retrieve more than $1 billion in allegedly misappropriated funds.
The lawsuit, filed by FTX under the direction of an executive team led by restructuring expert John Ray, named former Alameda Research CEO Caroline Ellison, FTX co-founder Gary Wang, former FTX engineering director Nishad Singh, and Bankman-Fried as defendants.
The complaint alleged that FTX executives breached their fiduciary duties by misappropriating customer funds on a “continuous basis to finance luxury condominiums, political and ‘charitable’ contributions, speculative investments and other pet projects.
One stance FTX lawyers mentioned in the lawsuit was Bankman-Fried’s $10 million gift to his father, distinguished legal scholar Joe Bankman.
The lawsuit claimed that the amount was routed from FTX to Bankman-Fried’s Morgan Stanley and TD Ameritrade accounts around January 2022.
Likewise, the attorneys alleged that Bankman-Fried and Wang used customer funds to purchase $546 million worth of shares in the trading platform Robinhood.
As reported, these shares became a center of contention with four entities laying claim to them.
Bankrupt crypto lender BlockFi, which is also an FTX creditor, FTX’s new management, as well as the US government wanted to keep a grasp of the shares.
However, the US Department of Justice eventually retained control of the shares.
The lawsuit also claimed that Ellison paid herself $28.8 million in bonuses and used $10 million of the funds to purchase a stake in an artificial intelligence company.
Former FTX Executives Made Fraudulent Transfers as the Platform Was Insolvent
The filing said many of the alleged fraudulent transfers occurred while the exchange was insolvent.
While FTX initially prohibited accounts carrying a negative balance, Bankman-Fried allegedly directed his associates to modify the exchange’s code.
“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.”
Nevertheless, the recent FTX lawsuit opens a new front in Ray’s efforts to reclaim assets to pay back creditors of the crypto exchange.
More recently, FTX lawyers filed a court motion seeking the recovery of $323.5 million from the leadership of FTX Europe, which includes Patrick Gruhn, Robin Matzke, Brandon Williams, and Lorem Ipsum UG.
The lawyers alleged that the FTX Europe leadership improperly used funds from the crypto exchange to acquire Swiss company DAAG without conducting any due diligence.
Likewise, the company has filed a complaint in Wilmington, Delaware, bankruptcy court, asking back the $700 million its founder Sam Bankman-Fried transferred to K5 entities in 2022.
It is worth noting that last month, FTX debtors revealed that the exchange has made “substantial progress” in securing assets, recovering as much as $7 billion in liquid assets so far.
The exchange owed customers approximately $8.7 billion when it went bankrupt last year.
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