For months, corporate turnaround expert John Jay Ray III, who was appointed to oversee the bankruptcy of the FTX crypto exchange, has attacked the company’s founder Sam Bankman-Fried, accusing him of “old-fashioned embezzlement.”
Now, Mr. Ray has a new target: Mr. Bankman-Fried’s parents.
On Monday, FTX filed a trial Joe Bankman and Barbara Fried, a longtime Stanford law professor, were charged in federal court in Delaware with using “access and influence within the FTX enterprise to enrich themselves.” The lawsuit demands the couple get back the millions of dollars they received from their son.
In the complaint, lawyers for FTX said that Mr. Bankman and Ms. Fried received a $10 million cash gift from Mr. Bankman-Fried, as well as a $16.4 million home in the Bahamas, where FTX was based, which was purchased by the exchange. . , The lawsuit also claims that Mr. Bankman helped conceal complaints from a former attorney for his son’s business, and that Ms. Fried helped Mr. Bankman-Fried and another lawyer avoid disclosure requirements for political donations. Trained FTX Executive.
“The couple either knew – or ignored glaring red flags – that their son, Bankman-Fried and other FTX insiders were orchestrating a massive fraud scheme,” the lawsuit says.
Spokespeople for Mr. Bankman and Ms. Fried did not immediately respond to requests for comment.
FTX filed for bankruptcy protection in November after a crackdown on deposits exposed an $8 billion gap in the exchange’s accounts. The following month, federal prosecutors in Manhattan accused Mr. Bankman-Fried of planning to use customer deposits to finance billions of dollars in venture capital investments, political donations and luxury real estate purchases. He has pleaded innocent and will be tried on October 3
The collapse of FTX prompted investigations into Mr Bankman and Ms Fried. A decorated tax professor, Mr. Bankman was an FTX employee heavily involved in the company’s philanthropic efforts, while Ms. Fried, also a respected scholar, ran a political-donor network that her son helped finance. has helped.
According to the lawsuit, Mr. Bankman helped arrange millions of dollars in loans to top employees and was listed in an internal document as a member of the firm’s management team. In messages cited in the lawsuit, Mr. Bankman complained that he was receiving a salary of only $200,000 a year, when he thought he would be making $1 million.
“Gee, Sam, I don’t know what to say here,” he wrote in an email cited in the lawsuit. “this is the first [I] Heard of salaries of 200K per year!”
Soon after, Mr. Bankman-Fried sent her a gift of $10 million, the lawsuit says. According to the lawsuit, Mr. Bankman also flew private jets and spent $1,200 per night in hotel stays at FTX, and he made a cameo appearance with comedian Larry David in an FTX commercial during the 2022 Super Bowl.
The lawsuit said Mr. Bankman pressed for his role in the ad, quoting him as saying he was not enamored with celebrities and that he “didn’t really care about meeting Tom Brady.” But Larry David…
The lawsuit also claims that Mr. Bankman helped conceal allegations from a former FTX lawyer that some of Mr. Bankman-Fried’s businesses engaged in money laundering and price manipulation. Instead of looking into those claims, Mr. Bankman suggested investigating the lawyer, the lawsuit says.
The lawsuit says Ms. Fried never worked for FTX, but was also deeply involved in her son’s work. According to the complaint, she advised him on political donations, encouraging him and other officials to make “straw donations”, thereby concealing that the money was coming from FTX, a tactic described as “avoiding federal campaign finance disclosure rules.” (if not infringed)”. ,
In an August 2022 email to Mr. Bankman-Fried, cited in the lawsuit, she mentioned another donor who would “give only in non-disclosed form” and said she would “strongly urge you to do the same – or any shall be substituted for “someone else’s name.”
Federal prosecutors have accused Mr. Bankman-Fried of starting the straw donation scheme, and two of his top advisers, Nishad Singh and Ryan Salame, have pleaded guilty to participating in it.
Mr. Bankman and Ms. Fried were frequent visitors to the Bahamas, living in a 30,000-square-foot estate with ocean views. Since the collapse of FTX, the couple have claimed that they “never believed” that the house belonged to them. But according to the lawsuit, a subsidiary of FTX paid for the home; The complaint says, Mr. Bankman emailed a top FTX executive in May 2022, inviting her and others to “celebrate/celebrate the home he helped us buy/live in.” of. The lawsuit says he and Ms. Fried were granted permanent residency in the Bahamas last October, with FTX covering $30,000 in fees associated with the applications.
According to the lawsuit, Mr. Bankman also asked FTX employees if the company that provided landscaping services for the home could bill FTX directly. A month after the purchases closed, Ms. Fried directed FTX employees to place online orders for a sofa, at least eight vases and a Persian hand-knotted rug valued at more than $2,500, the complaint said .
