FTX Sues Founder Sam Bankman-Fried to Recoup Funds

Summary:

• FTX, a bankrupt crypto exchange, is suing its founder, Sam Bankman-Fried, and other former top executives, seeking to recover over $1 billion in misappropriated funds.
• Criminal charges were previously filed against Bankman-Fried, alleging he stole billions in FTX customer funds to cover losses at his hedge fund.
• The lawsuit targets Bankman-Fried's associates who were involved in misappropriating funds for personal luxury and speculative investments.
• The alleged fraud includes multimillion-dollar awards of equity without any value received and misappropriated funds used to buy shares of Robinhood.
• The US bankruptcy code allows voiding of alleged fraudulent transfers made with the intention to defraud a bankrupt estate.

Bankrupt crypto exchange FTX is suing its indicted founder, Sam Bankman-Fried, and other former top executives to try and claw back over $1 billion in funds they allegedly misappropriated before the company went bankrupt.

This legal action comes months after criminal charges were filed against Bankman-Fried, and prosecutors alleged he stole billions in FTX customer funds to plug losses at his hedge fund Alameda Research. FTX, now led by a caretaker CEO John Ray, an attorney who helped manage Enron after the energy trader's 2001 bankruptcy, filed the complaint in a Delaware bankruptcy court. The lawsuit named three of Bankman-Fried's associates, Caroline Ellison, Jishal Gary Wang, and Nishad Singh, who, along with Bankman-Fried, continually misappropriated funds to finance luxury condos, speculative investments, and other pet projects, while committing one of the largest financial frauds in history. Among the alleged fraud was $725 million of equity that FTX and Westrom Shires, an entity Bankman-Fried controlled, awarded without receiving any value in exchange. The filing also revealed that Bankman-Fried and Wang allegedly misappropriated $546 million to buy shares of Robinhood, while Ellison used $28.8 million to pay herself bonuses.

The US bankruptcy code allows alleged fraudulent transfers to be voided if made two years before Chapter 11 filings and if the transfers were made with the intention to defraud a bankrupt estate. Ace Bookspin for Bankman-Fried declined to comment. US prosecutors have called Bankman-Fried the mastermind of a fraud that led to FTX's collapse while he himself has pleaded not guilty to several criminal charges.