FTX Sues Sam Bankman-Fried, Others for $1B, Says He's Using Misappropriated Funds to Pay for Defence

FTX Sues Sam Bankman-Fried, Others for $1B, Says He’s Using Misappropriated Funds to Pay for Defence

Updated: 21 July 2023

Disclosure

Don’t invest unless prepared to lose all the money you invest. This is a high-risk investment, you shouldn’t expect to be protected if something goes wrong.

Join Our Telegram channel to stay up to date on breaking news coverage

FTX filed a new lawsuit against former CEO Sam Bankman-Fried (SBF) and three other executives in an attempt to recoup $1 billion for clients who suffered losses.

The lawsuit was filed July 20 and accuses the SBF, former Alameda Research CEO Caroline Ellison, FTX co-founder Zixiao “Gary” Wang, and former FTX engineering director Nishad Singh of misappropriating clients’ funds, especially in the months before its bankruptcy.

It also alleged that SBF gave his father a $10 million “gift” using money he had transferred from an account containing clients’ assets, and that those funds are now being used to finance his defense.

#FTX is suing Bankman-Fried and others to recover over $1 billion.

FTX Trading on Thursday filed a lawsuit against founder Sam Bankman-Fried and other former #cryptocurrency exchange executives seeking to recover more than $1 billion they allegedly misappropriated before FTX… pic.twitter.com/ACrXBJai9b

— Yana Pinchuk (@missYanaNFT) July 21, 2023

“Defendants abused their control over the FTX Group to commit one of the largest financial frauds in history,” FTX said in the lawsuit. “Defendants misappropriated debtor funds on a continuous basis to finance luxury condominiums, political and “charitable” contributions, speculative investments and other pet projects that inured to the benefit of defendants.”

The lawsuit further states that the group ran the company without regard for formalities, granting themselves limitless power to direct the transfer of funds. They are also accused of losing customer funds and using them to buy companies without consulting the stakeholders.

The lawsuit also alleges that the former executives granted themselves equity worth more than $725 million, and FTX claims that Bankman-Fried and Wang spent $546 million of the company’s funds to buy Robinhood stock.

The two, along with Singh, also borrowed money from Alameda without posting any collateral, while Ellison gave herself bonuses totaling $28.8 million and used $10 million of the money to buy stock in an AI startup, the document says.

FTX filed for bankruptcy in November after it faced a liquidity crisis with its native token FTT. It later emerged that most of the exchange’s funds had been transferred to a sister company, Alameda Research.

Alameda, through its high-risk investments, had in turn lost $8 billion of users’ funds, leaving the exchange unable to meet customer withdrawals. SBF was also found to have been involved with the company’s collapse by mismanaging the company’s funds with assistance from some of the company’s executives, it was alleged.

SBF and even some celebrities and executives are facing lawsuits for allegedly deceiving investors for acts including misappropriation of funds, committing fraud, and market manipulation among other charges.

FTX Seeks Justice

FTX, led by new CEO John Ray, is looking to recover all clients’ property that was subject to fraudulent transfer. The company is also suing for damages, which in addition to the client’s property, could total over $1 billion. With these funds, FTX hopes to pay off the thousands of individuals whose assets were frozen when the exchange halted withdrawals last year.

The FTX Debtors have launched their online customer claims portal for the customer bar date, which has been set for September 29, 2023, at 4 PM ET. Customers can access the portal at https://t.co/DkYi2hDLbI. For more information, see our recent Release: https://t.co/vI9rQ27abp

— FTX (@FTX_Official) July 13, 2023