FTX: ‘King of crypto’ parents sued over missing millions

Joseph Bankman, father of Sam Bankman-Fried, the founder of bankrupt cryptocurrency exchange FTX, leaves the courthouse, after U.S judge revoked Bankman-Fried's bail, in New York, U.S., August 11, 2023.Reuters

The parents of Sam Bankman-Fried, the founder of FTX, are facing a lawsuit due to losses associated with the downfall of the cryptocurrency company.

Managers at the bankrupt company allege that the couple possesses millions of dollars that were fraudulently transferred, and they also claim that the couple ignored any wrongdoing happening within the company.

The action was filed on behalf of the millions of FTX customers who lost money when it collapsed last year.

Mr Bankman-Fried was arrested as a result of the company’s downfall.

US prosecutors have accused the former billionaire, once dubbed the “King of Crypto”, of illegally transferring millions from the exchange to plug losses at his trading firm, make political donations and buy property.

He is currently in jail, awaiting trial next month, and has denied the charges.

The lawyers representing his parents stated that the accusations made against them were entirely untrue and intended to harm their son’s prospects during the trial.

The legal action, filed as part of a wider bankruptcy suit, says Mr Bankman-Fried’s parents – then both professors at Stanford University – exploited their “access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars”.

According to the filing, they were given a cash gift of $10 million (£8 million) from funds owned by Alameda, a partner company of FTX. Additionally, FTX provided them with a property worth $16.4 million in the Bahamas.

FTX was once one of the biggest cryptocurrency trading firms in the world, holding assets worth an estimated $15bn in 2021. It filed for bankruptcy last year, after a sudden rush by customers to withdraw funds revealed a huge gap in the company’s finances reportedly worth up to $8bn.

The managers of the insolvent company allege that Mr. Bankman-Fried and other individuals considered as “insiders” treated it as a personal source of funds, while his parents were involved in either sustaining or gaining from this deceitful generosity.

The filing claims his father, Allan Joseph Bankman, an expert on US tax law, served as a adviser to FTX and “played a key role in perpetuating this culture of misrepresentations and gross mismanagement and helped cover up allegations that would have exposed the fraud”.

Additionally, it states that he assisted in suppressing a 2019 internal complaint regarding price manipulation.

According to the lawsuit, Mr. Joseph Bankman supposedly enjoyed accommodations at hotels that cost $1,200 per night. The lawsuit also mentions messages where he expresses dissatisfaction with his $200,000 salary, stating that it should be $1 million.

According to the filing, Barbara Fried, the mother of Mr. Bankman-Fried, assisted in guiding her son’s political contributions and advised him to conceal their origin.

The FTX managers are attempting to retrieve funds from the couple.

The decline of Mr. Bankman-Fried, a prominent figure in the industry, caused concern within the sector and contributed to increased regulatory attention.

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