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- The fallout of FTX's implosion continues, with Sam Bankman-Fried's parents now facing a lawsuit.
- Barbara Fried and Allan Joseph Bankman were accused of siphoning millions of dollars from the firm.
- The couple says the claims are false, and are an attempt to silence them ahead of an October trial.
Lawyers for FTX Trading have filed a lawsuit accusing the parents of its founder, Sam Bankman-Fried, of exploiting their influence over their son to siphon millions of dollars from the company, while spending lavishly on a luxury home in the Bahamas and funneling contributions to their "pet causes" and Stanford University.
The complaint filed Monday against SBF's parents, Barbara Fried and Allan Joseph Bankman, in the collapsed cryptocurrency exchange's bankruptcy case in Delaware seeks to recover the company's damages that the company allegedly caused.
FTX entered bankruptcy in November when the global exchange ran out of money after the equivalent of a bank run.
Sam Bankman-Fried has pleaded not guilty to charges that he cheated investors and looted customer deposits to make lavish real estate purchases, campaign contributions to politicians, and risky trades at Alameda Research, his cryptocurrency hedge fund trading firm.
His trial on federal fraud charges is scheduled to begin Oct. 3 in Manhattan. Several other former FTX executives have pleaded guilty to fraud and conspiracy charges and are cooperating with investigators.
The lawsuit alleges that Bankman, a Stanford University law professor and expert in tax law, and Fried, a retired Stanford law professor, participated in the wrongdoing that led to the collapse of FTX and resulted in both criminal and civil investigations.
"Despite presenting itself to investors and the public as a sophisticated group of cryptocurrency exchanges and businesses, the FTX Group was a self-described 'family business,'" the lawsuit claims.
"Bankman played a key role in perpetuating this culture of misrepresentations and gross mismanagement and helped cover up allegations that would have exposed the fraud committed by the FTX insiders," the complaint adds. "And together, Bankman and Fried siphoned millions of dollars out of the FTX Group for their own personal benefit and their chosen pet causes."
Attorneys for Bankman and Fried issued a statement denying the allegation and taking aim at John Ray III, who was named CEO when FTX sought bankruptcy protection and is charged with trying to clean up the mess left by its collapse.
"This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child's trial begins," the attorneys for Bankman and Fried wrote. "These claims are completely false. Mr. Ray and his massive team of lawyers, who are collectively running up countless millions of dollars in fees while returning relatively little to FTX clients, know better."
Among other things, the lawsuit alleges that the couple helped orchestrate a scheme in which their son gave them a nontaxable "gift" of $10 million. The alleged scheme involved Bankman-Fried receiving a loan from Alameda, then transferring the money to his parents. The lawsuit describes the transaction as "part of a scheme and pattern to enrich and otherwise benefit themselves."
The complaint also claims that more than $18.9 million in FTX funds was used to purchase a 30,000-square-foot luxury residence in the Bahamas for Bankman and Fried, who also benefited from more than $90,000 in FTX-funded expenses to furnish and maintain the property.
Meanwhile, the lawsuit alleges, Bankman directed more than $5.5 million in charitable contributions from FTX to Stanford University in what the complaint describes as "naked self-dealing" in an attempt to "curry favor with and enrich his employer at the FTX Group's expense."
Fried is accused of encouraging her son and other FTX insiders to make unlawful political contributions, including to "Mind the Gap," or MTG, a political action committee she co-founded and for which she served as president and chairwoman.
As for Bankman-Fried, the disgraced crypto wonder child is being held in a Brooklyn prison notorious for its poor conditions, while he awaits trial.
"The truth is that I did what I thought was right," he wrote in an unpublished Twitter thread, shortly after his arrest.