FTX has filed a lawsuit against the parents of its founder, Sam Bankman-Fried, with the aim of recovering millions of dollars that the company alleges were fraudulently transferred and “misappropriated,” according to a court filing made late on Monday, The Wall Street Journal reported.
The lawsuit, filed in a Delaware bankruptcy court, represents the latest effort by FTX’s CEO, John J. Ray III, to recover some of the funds that Bankman-Fried allegedly distributed to family members and associates prior to the cryptocurrency exchange’s collapse in November of the previous year. Joseph Bankman and Barbara Fried are accused of taking advantage of their connections and influence within the FTX enterprise to enrich themselves.
Bankman-Fried’s parents, both professors at Stanford Law School, had been serving as his legal advisors during FTX’s collapse.
Bankman-Fried is set to face trial on October 3rd. Yuki Iwamura/Bloomberg | Getty Images.
According to the complaint, Bankman played a significant role in FTX’s operations, managing tax matters, advising on personnel hires, actively participating in high-level discussions, and referring to FTX as a family business. It also alleges that Bankman received substantial rewards for his work at FTX, including a $10 million gift from Bankman-Fried in early 2022, funded by Bankman-Fried’s trading firm, Alameda Research.
Although Fried did not hold a formal position at FTX, management claimed she was the primary advisor to her son regarding his political contributions, which totaled approximately $40 million ahead of the 2022 midterm elections.
The lawsuit also asserted that Bankman and Fried advocated for substantial political and charitable contributions, including over $5.5 million to Stanford University. Stanford confirmed to the WSJ that it had received gifts from the FTX Foundation and related entities but that the university would return the funds in full.
Attorneys for Bankman and Fried denied the accusations, calling them “completely false” and suggesting that Ray’s legal team was accumulating fees without benefiting FTX clients, adding that the lawsuit appeared to be an effort to exert pressure on the parents and hinder their child’s impending trial.
“This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins,” Bankman and Fried’s lawyers wrote in a statement, per The WSJ.
Federal prosecutors have charged Bankman-Fried with defrauding billions of dollars from customers to finance his expansive business ventures through FTX. He denies the allegations and is set to face trial on October 3rd.