The FTX legal saga continues to play out as parents of the company’s founder, Sam Bankman-Fried, have been sued by the FTX parent company Alameda Research, for improperly receiving millions of dollars from the scheme.
The legal action that was filed against Allan Joseph Bankman and Barbara Fried as part of a larger bankruptcy suit, explains that the two exploited their "access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars."
Bankman-Fried’s parents are both professors at the Ivy League university, Stanford. As an expert on US tax law, the filing argues that Mr Bankman positioned himself as an insider at the centre of the FTX group, advising them on both business and legal affairs. Mrs Fried, also a Stanford law professor, allegedly helped to direct her son make political donations while obscuring the source.
The filing states that Bankman and Fried “either knew—or ignored bright red flags revealing—that their son, and other FTX Insiders were orchestrating a vast fraudulent scheme to profit and promote their personal and charitable agendas at the Debtors’ expense.”
It adds that despite knowing or ignoring the FTX Group’s insolvency, the two discussed with the son the transfer to them of a $10 million cash gift and a $16.4 million luxury property in The Bahamas.
They also pushed for tens of millions of dollars in political and charitable contributions, including to Stanford University, which were seemingly designed to boost Bankman’s and Fried’s professional and social status at the expense of the FTX Group, and by extension, its customers and other creditors.
The filing states that “in reality, the FTX.com exchange served as a piggy bank from which FTX Insiders funded billions of dollars in recklessly speculative and unhedged trading by Alameda.”
It claims that the FTX Insiders including defendants Bankman and Fried, withdrew billions more for purported “venture” investments, real estate purchases, purported personal “loans,” charitable and political contributions, and all manner of other transfers designed to benefit themselves by enhancing their lifestyles, ingratiating themselves with business prospects and potential allies, and lining their own and their families’ and friends’ pockets.
The document states that the duo helped perpetuate and benefited from this “fraudulent largesse.”
Sam Bankman-Fried was arrested in the Bahamas in December 2022, pleading not guilty to charges brought against him related to the collapse of FTX. Bankman-Fried was sent to jail after his bail was revoked in August 2023 over alleged witness tampering.