- Bankman and Fried allegedly used their insider status within FTX to amass personal wealth.
- FTX has asserted claims for fraudulent transfer, breach of fiduciary duty, unjust enrichment, and other causes of action.
FTX has filed a lawsuit against the parents of its founder, Sam Bankman-Fried [SBF]. On 18 September, the exchange lodged a complaint against Allan Bankman and Barbara Fried, accusing them of orchestrating parts of FTX’s deception and improperly diverting more than $30 million from the company.
The lawsuit contended that Bankman and Fried used their insider status within FTX to amass personal wealth while the company faced financial turmoil and eventually collapsed in November 2022.
The core allegations against Bankman included committing breach of fiduciary duty and aiding and abetting fraud, among others. On the other hand, they accused Fried of unjust enrichment and aiding and abetting fraud. These primarily concerned her political fundraising activities.
More specifically, the complaint suggested that Joseph Bankman and Barbara Fried received substantial benefits at FTX’s expense. This includes a staggering $10 million cash gift, ownership of a luxurious $16.4 million property in the Bahamas, over $5 million in donations directed to Stanford University (where they both work), and other perks—all while being aware of, or turning a blind eye to, signs of financial trouble and impropriety within FTX.
Allan Bankman and Barbara Fried accused of misappropriation
Allan Joseph Bankman allegedly occupied crucial advisory roles at FTX that could have enabled him to introduce controls. Reports suggested that he repeatedly ignored red flags related to the improper use of customer funds and fraudulent practices.
Moreover, Bankman allegedly facilitated the redirection of over $5.5 million in FTX donations to his employer, Stanford University. He also reportedly advised routing the $10 million gift to avoid taxes.
During this period, Bankman took a leave of absence from Stanford to focus on FTX. He also reportedly lobbied for a substantial salary increase for his son, Sam Bankman-Fried.
Bankman is said to have enriched himself through extravagant travel, appearances in FTX commercials, and other benefits.
In Barbara Fried’s case, the complaint asserts that she exerted pressure on SBF and other FTX executives to make political donations to Mind the Gap, a political action committee she co-founded.
This pressure led to multiple donations that allegedly violated campaign finance laws, including the use of straw donors to conceal the source of funds.
The FTX entities are now seeking to recover the alleged improper transfers and benefits that Bankman and Fried received. They have asserted claims for fraudulent transfer, breach of fiduciary duty, unjust enrichment, and other causes of action.
John Deaton raises concerns
Meanwhile, John Deaton, a lawyer representing Ripple [XRP] holders, has raised concerns about the United States Department of Justice’s (DOJ) handling of the prosecution of Sam Bankman-Fried.
Notably, Deaton was of the belief that the DOJ was displaying selective enforcement in the case, favoring certain individuals and entities connected to SBF while not taking action against them.
Deaton suggested that if SBF’s parents were not politically connected, they would have faced arrest. He pointed out that their political affiliations and donations to the Democratic Party may be influencing the lack of legal action against them.
The DOJ is 💯 compromised and, like the SEC, as well as almost every other federal agency, needs to be cleaned out and reshaped. Make no mistake about it, if SBFraud’s parents weren’t connected to @ewarren and weren’t huge donors to the Democratic Party (SBF’s mom runs a PAC),… https://t.co/VsKqcxRgXG
— John E Deaton (@JohnEDeaton1) September 16, 2023