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FTX founder Sam Bankman-Fried has sued US insurer CNA for allegedly failing to pay out on a policy taken out to meet his legal bills, after $10mn in cover from London-based Beazley and Australia’s QBE maxed out.
As his New York trial got under way this week, Bankman-Fried filed a legal complaint against a unit of Chicago-based CNA, saying that the company had not paid out on directors and officers insurance intended to cover defence costs.
One $5mn policy provided by Beazley, and a second of the same amount from QBE, were exhausted after the insurers agreed to pay up, according to the legal filing. That should have triggered the so-called excess policy provided by CNA, Bankman-Fried’s lawyers argued.
The question of how Bankman-Fried would pay the multimillion-dollar bill for his defence has remained unclear after the former crypto billionaire claimed that almost all his wealth was wiped out in the collapse of FTX.
Bankman-Fried had tried to secure more than $400mn worth of Robinhood shares, owned by one of his companies, claiming through lawyers that he “requires some of these funds to pay for his criminal defence”. His arguments were unsuccessful and the shares, seized by the US justice department, were sold back to the US brokerage firm in September.
The new management running FTX in bankruptcy claimed in a lawsuit last month that Bankman-Fried gave his parents, Joe Bankman and Barbara Fried, a $10mn cash gift originating from Alameda, Bankman-Fried’s trading firm. A representative for Bankman and Fried has said the lawsuit’s claims are “completely false”. The money has been used for Bankman-Fried’s criminal defence, FTX has alleged.
The two law professors had previously pledged their California home to help secure their son’s bail. A spokesperson for Bankman-Fried declined to comment.
Despite “numerous requests” by Bankman-Fried, CNA has “unjustifiably failed to make timely payment” on his claims, the complaint states.
These alleged breaches of the policy “have caused, and threaten to cause, substantial and irreparable harm” to Bankman-Fried, including the “impairment of Mr Bankman-Fried’s defence against the numerous criminal and civil claims asserted against him”.
The legal complaint demands that CNA be directed to pay towards his defence costs, and says substantial monetary damages have also been incurred, in excess of $75,000.
CNA and Beazley declined to comment. QBE did not respond immediately to a request for comment.
Insurers have been cautious about taking on crypto firms and founders as clients, given concerns about the risks presented by the sector, but D&O policies represent one of the industry’s biggest areas of exposure to crypto, according to brokers.
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