HomeBusinessFTX is suing the parents of founder Bankman-Fried

FTX is suing the parents of founder Bankman-Fried

By Dietrich Knauth

NEW YORK (Reuters) – Bankrupt cryptocurrency exchange FTX sued the parents of founder Sam Bankman-Fried on Monday, saying Stanford professors Joseph Bankman and Barbara Fried used the company to enrich themselves at the expense of FTX customers.

FTX, now led by turnaround specialist John Ray, said founder Sam Bankman-Fried ran FTX as a “family business” and misappropriated billions in customer funds to benefit a small circle of insiders, including his parents.

Sam Bankman-Fried has pleaded not guilty to charges that he defrauded FTX customers by using their money to support his own risky investments. He is currently in custody awaiting a trial scheduled to begin on October 3. Other former FTX executives have pleaded guilty to criminal charges.

Bankman and Fried’s attorneys, Sean Hecker and Michael Tremonte, said in a joint statement that FTX’s claims were “completely false” and that the new lawsuit was a waste of money that could be returned to FTX customers.

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“This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury trial just days before their child’s trial begins,” Hecker and Tremonte said.

FTX’s lawsuit alleges that Bankman and Fried accepted a $10 million cash gift and a $16.4 million luxury real estate property in the Bahamas from FTX even as the company teetered on the brink of collapse. Bankman and Fried also urged FTX to donate tens of millions of dollars in charitable contributions, including to Stanford University, FTX said.

Bankman-Fried’s father, a tax specialist at Stanford Law School, often positioned himself as the “adult in the room” in a company run by his son, now 31, and other executives with little management experience. But Bankman “remained silent” when he saw warning signs of fraud and did little to prevent FTX management from embezzling customer funds, the lawsuit said.

Fried had the strongest influence on FTX’s political contributions, leading Bankman-Fried and other executives to contribute millions of dollars directly to a political action committee she co-founded, according to FTX.

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FTX filed for bankruptcy in November 2022 following claims that it misused and lost customers’ crypto deposits worth billions of dollars.

FTX has recovered more than $7 billion in assets to reimburse customers, and is pursuing additional recoveries through lawsuits against FTX insiders and other defendants who received money from FTX before it went bankrupt.

(Reporting by Dietrich Knauth, editing by Nick Zieminski)

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