Sam Bankman-Fried’s Parents Sued by FTX

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For months, John Jay Ray III, the company turnaround professional who was appointed to supervise the chapter of the FTX crypto trade, has attacked the corporate’s founder, Sam Bankman-Fried, accusing him of “old style embezzlement.”

Now, Mr. Ray has a brand new goal: Mr. Bankman-Fried’s mother and father.

On Monday, FTX filed a lawsuit in federal courtroom in Delaware accusing Joe Bankman and Barbara Fried, longtime Stanford regulation professors, of utilizing their “entry and affect throughout the FTX enterprise to counterpoint themselves.” The lawsuit seeks to claw again hundreds of thousands of {dollars} the couple obtained from their son.

Within the grievance, FTX’s legal professionals mentioned that Mr. Bankman and Ms. Fried obtained a $10 million money present from Mr. Bankman-Fried, in addition to a $16.4 million dwelling within the Bahamas, the place FTX was primarily based, that was bought by the trade. The go well with additionally claims that Mr. Bankman helped cowl up complaints by a former lawyer for his son’s enterprise, and that Ms. Fried coached Mr. Bankman-Fried and one other FTX govt to evade disclosure necessities for political donations.

The couple “both knew — or ignored vibrant purple flags revealing — that their son, Bankman-Fried, and different FTX Insiders have been orchestrating an unlimited fraudulent scheme,” the lawsuit mentioned.

In a press release, legal professionals for Mr. Bankman and Ms. Fried mentioned FTX’s claims have been “utterly false” and known as the lawsuit “a harmful try and intimidate Joe and Barbara and undermine the jury course of simply days earlier than their little one’s trial begins.”

FTX filed for chapter safety in November, after a run on deposits uncovered an $8 billion gap within the trade’s accounts. The following month, federal prosecutors in Manhattan charged Mr. Bankman-Fried with orchestrating a scheme to make use of buyer deposits to finance billions of {dollars} in enterprise capital investments, political donations and luxurious actual property purchases. He has pleaded not responsible, and is scheduled to go on trial on Oct. 3

FTX’s collapse fueled scrutiny of Mr. Bankman and Ms. Fried. A adorned tax professor, Mr. Bankman was an FTX worker who was closely concerned within the firm’s philanthropic efforts, whereas Ms. Fried, additionally a revered scholar, ran a political-donor community that her son helped finance.

In line with the lawsuit, Mr. Bankman helped prepare a whole bunch of hundreds of thousands of {dollars} in loans to prime staff and was listed on an inside doc as a member of the agency’s administration group. In messages cited within the lawsuit, Mr. Bankman complained that he was receiving a wage of solely $200,000 a yr, versus the $1 million he thought he would get.

“Gee, Sam I don’t know what to say right here,” he wrote in an e-mail cited within the go well with. “That is the primary [I] have heard of the 200K a yr wage!”

Quickly after, Mr. Bankman-Fried despatched him the $10 million present, the lawsuit mentioned. Mr. Bankman additionally flew on personal jets and expensed $1,200 per evening lodge stays to FTX, based on the lawsuit, and he made a cameo look alongside the comic Larry David in an FTX industrial through the 2022 Tremendous Bowl.

Mr. Bankman pushed for his function within the industrial, the lawsuit mentioned, quoting him as saying that he wasn’t obsessive about celebrities and didn’t “actually care about assembly, say, Tom Brady. However Larry David….”

The lawsuit additionally claims that Mr. Bankman helped cowl up allegations by a former FTX lawyer that a few of Mr. Bankman-Fried’s companies had engaged in cash laundering and value manipulation. Quite than look into these claims, the lawsuit mentioned, Mr. Bankman instructed investigating the lawyer.

Ms. Fried by no means labored for FTX, however she was additionally intimately concerned in her son’s work, the lawsuit mentioned. In line with the grievance, she suggested him on political donations, encouraging him and different executives to make “straw donations” that hid that the cash was coming from FTX, a technique designed to “keep away from (if not violate) federal marketing campaign finance disclosure guidelines.”

In an August 2022 e-mail to Mr. Bankman-Fried, cited within the go well with, she introduced up one other donor who would “solely give in a non-disclosed type” and mentioned she “would strongly urge you to do the identical — or substitute another person’s title.”

Federal prosecutors have accused Mr. Bankman-Fried of orchestrating a straw donation scheme, and two of his prime advisers, Nishad Singh and Ryan Salame, have pleaded responsible to collaborating in it.

Mr. Bankman and Ms. Fried have been frequent guests to the Bahamas, staying at a 30,000-square-foot property with ocean views. Since FTX’s collapse, the couple has claimed they “by no means believed” they owned the home. However based on the go well with, a subsidiary of FTX paid for the house; Mr. Bankman emailed a prime FTX govt in Might 2022, inviting him and others over to “have fun the home you helped us purchase/transfer into,” the grievance mentioned. He and Ms. Fried have been granted everlasting residency within the Bahamas final October, the go well with mentioned, with FTX masking $30,000 in charges related to the purposes.

Mr. Bankman additionally requested FTX staff if the corporate that offered landscaping providers for the home may invoice FTX immediately, based on the lawsuit. And one month after the acquisition was closed, the grievance mentioned, Ms. Fried instructed FTX staff to position on-line orders for a settee, no less than eight vases and a Persian hand-knotted rug costing greater than $2,500.

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