In an attempt to recoup over $1 billion, FTX, the cryptocurrency exchange, has filed a lawsuit against its founder Sam Bankman-Fried (SBF) along with several ex-executives. The new management at FTX claims that this substantial amount was improperly diverted through questionable deals and transactions prior to the crypto trading platform filing for bankruptcy last autumn.
Embattled Crypto Company FTX Initiates New Lawsuit Against Founders and Senior Executives
FTX Trading, the firm that previously ran one of the largest cryptocurrency exchanges, filed a lawsuit on Thursday against its founder Sam Bankman-Fried and several former executives, alleging that they illegally siphoned off more than $1 billion.
Alongside Bankman-Fried, the suit names other defendants including co-founder and ex-FTX Chief Technology Officer Gary Wang, Caroline Ellison, who was formerly the CEO of SBF’s Alameda Research hedge fund, and former FTX Engineering Director Nishad Singh, as reported by Reuters and Bloomberg.
The lawsuit lodged in the U.S. Bankruptcy Court, District of Delaware, accuses them of improper use of funds, allegedly diverting them to finance high-end condos, political donations, speculative investments, and other personal pursuits.
The alleged transfers occurred between February 2020 and November 2022, leading up to the time the company filed for Chapter 11 protection. FTX asserts that these transactions could be reversed under U.S. Bankruptcy Code or Delaware law, given they took place prior to the bankruptcy filing on Nov. 11.
The suit alleges that these fraudulent transactions included over $725 million in equity that FTX and West Realm Shires, another SBF-controlled entity, granted “without receiving any value in exchange.” Bankman-Fried and Wang are also accused of extracting $546 million from Alameda in May 2022 to acquire Robinhood Markets shares, while Ellison allegedly used $28.8 million to award herself bonuses. As per FTX:
The transfers were made when [FTX-related entities] were insolvent, and the defendants were aware of it.
Post his extradition from the Bahamas, the former headquarters of FTX, SBF has faced allegations of fraud and other criminal charges in the United States, to which he has pleaded not guilty. Conversely, Ellison, Wang, and Singh have entered guilty pleas and agreed to collaborate with the prosecution.
In the latest legal complaint, FTX additionally alleges that a portion of Sam Bankman-Fried’s legal defense is being financed through a $10 million “gift” he provided his father. These legal pursuits, led by FTX’s new CEO, John Ray, and his team, are part of a broader effort to recover funds to repay creditors, including customers of the defunct cryptocurrency exchange.
What are your thoughts on the potential for FTX’s new management to reclaim the funds reportedly misused by its previous executives? Share your views on this unfolding case in the comments section below.
Frequently Asked Questions (FAQs) about FTX lawsuit
Who has FTX filed a lawsuit against?
FTX has filed a lawsuit against its founder, Sam Bankman-Fried (SBF), as well as several former executives including Gary Wang, Caroline Ellison, and Nishad Singh.
How much is FTX attempting to recover through the lawsuit?
FTX is seeking to recover over $1 billion, which the new management claims was improperly diverted through questionable transactions before the company filed for bankruptcy.
What are the accusations against the former executives?
The former executives, including SBF, are accused of misappropriating funds to finance personal pursuits such as luxury condos, political donations, and speculative investments.
When did the alleged misappropriation occur?
The alleged misappropriation occurred between February 2020 and November 2022, leading up to the time the company filed for Chapter 11 protection.
How does FTX plan to recover the funds?
FTX hopes to recover the funds through the lawsuit, and asserts that the transactions could be reversed under the U.S. Bankruptcy Code or Delaware law.
Who is the new CEO of FTX?
The new CEO of FTX is John Ray, who, along with his team, is leading the effort to recover the funds and repay creditors.
How are the former executives responding to the accusations?
SBF has pleaded not guilty to the allegations of fraud and other criminal charges in the United States. On the other hand, Ellison, Wang, and Singh have entered guilty pleas and agreed to cooperate with the prosecution.
More about FTX lawsuit
- FTX Official Website
- Alameda Research
- Delaware Bankruptcy Court
- Details about Chapter 11 Protection
- Information on Robinhood Markets