- Former FTX CEO (SBF), among other executives, Caroline Ellison, Gary Wang and Nishad Singh, named in the suit from FTX
- The suit seeks to recoup over $1 billion they allegedly misappropriated before FTX filed for Chapter 11 protection.
- The crypto platform has alleged that the former executives issued more than $725 million worth of equity to themselves ‘’ without receiving any value in exchange.”
FTX has sued former CEO Sam Bankman-Fried (SBF) and several former critical executives from the now-bankrupt crypto exchange to recover more than $1 billion in misappropriated funds.
A complaint filed in Delaware bankruptcy court also names Caroline Ellison, who led Bankman-Fried’s Alameda Research hedge fund; former FTX technology chief Zixiao “Gary” Wang; and former FTX engineering director Nishad Singh as defendants.
FTX alleged in the lawsuit that the defendants continually misappropriated funds to finance luxury condominiums, political contributions, speculative investments, and other “pet projects” while committing “leading to one of the largest financial frauds in history.
FTX said these transfers were made when the exchange and its subsidiaries were insolvent, claiming they were aware of the failing financial situation. Part of the numerous transfers and transactions listed in the lawsuit include previously mentioned political donations worth $100 million. Also, the defendants used more than $500 million to acquire Robinhood shares confiscated by government officials.
The alleged fraudulent transfers occurred between February 2020 and November 2022 when FTX filed for Chapter 11 protection.
The suit further claimed that the defendants created an environment where a handful of employees had “virtually limitless power” to oversee transfers of fiat and crypto assets. Additionally, the defendants granted themselves the power to hire and fire employees with “no effective oversight” on how they exercised these powers.
According to Thursday’s complaint, the fraudulent transfers included more than $725 million of equity that FTX and West Realm Shires, an entity that Bankman-Fried controlled, awarded “without receiving any value in exchange.’’
FTX claimed Bankman-Fried and Wang also misappropriated an additional $546 million to purchase shares in the Robinhood trading platform. The suit notably stated that Ellison paid herself $28.8 million in bonuses and used $10 million to acquire a stake in an artificial intelligence company.
Nonetheless, the allegations stated that Bankman-Fried transferred $10 million from his account on FTX to his father, Joseph Bankman, a law professor at Stanford Law School. It was labelled as a gift. Shortly afterwards, the filing asserts, Bankman-Fried’s father made six transfers totalling $6.75 million to his accounts at Morgan Stanley and TD Ameritrade. The lawsuit claims that SBF’s father uses part of the “gift money” to fund his son’s criminal defense.
U.S. prosecutors have called Bankman-Fried the mastermind of fraud that led to FTX’s collapse, including misappropriating billions of dollars of customer funds. The former FTX CEO has pleaded not guilty to several criminal charges. On the other hand, Ellison, Wang and Singh have pleaded guilty and agreed to cooperate with prosecutors.
FTX is now led by John Ray, who helped manage Enron after the energy trader’s 2001 bankruptcy.
