Joe Bankman and Barbara Fried allegedly used their expertise as legal scholars to access tens of millions in FTX funds.
When we think of the spectacular crash of FTX last November, one figure comes to mind: the unkempt 30-something tech-bro with distinctivly dark, dishevelled hair – Sam Bankman-Fried, colloquially referred to as SBF.
SBF was the co-founder and CEO of FTX, and he is currently in jail awaiting trial for his part in the collapse of the crypto exchange, where he faces a litany of fraud-related criminal charges.
New evidence however suggests that SBF had more accomplices than he let on: namely, his parents.
A September 18 court filing shows that FTX, which is now undergoing complex bankruptcy proceedings, has sued SBF’s parents – Joe Bankman and Barbara Fried – in a bid to “recover millions of dollars in fraudulently transferred and misappropriated funds”.
From Stanford law professors to profiteering parents
SBF’s parents are both reputed Stanford professors of law, with Joe Bankman specialising in tax law. Both said that their involvement in their son’s company was minimal, but documents reveal they personally profited up to $26 million in cash and real estate in 2022 alone.
The September 18 FTX filing asks the court to award the FTX estate damages, as well as the return of any property or payments made to Joe Bankman and Barbara Fried by FTX.
One such payment is a $10 million “cash gift” made to Bankman and Fried from Alameda Ltd funds.
The filing states, “Bankman’s command of tax law and unique understanding of the FTX Group’s muddled corporate structure allowed him to facilitate the transfer of a cash gift totaling $10 million to himself and Fried consisting of Alameda Ltd. funds.”
The filing reveals that FTX paid nearly $19,000,000 to Blue Water, to which Bankman and Fried “received title”, as well as $90,000 in Blue Water-related expenses.
Some expenses outlined in the filing include $1,200-per-night hotel stays, plane tickets, a $200,000 annual salary to Joe Bankman for his role as an adviser to the FTX Foundation, and $5.5 million in donations to Stanford University.
The filing also asks for punitive damages in light of Bankman and Fried’s “conscious, willful, wanton, and malicious conduct.”
The legal background of Joe Bankman and Barbara Fried is a notable point in the filing.
It outlines that both “deployed their decades of experience as sophisticated law professors and veneer of legitimacy not to help the FTX Group, but rather to plunder it in order to enrich themselves and their pet causes.”
FTX will soon start liquidating its assets
John Ray III, a prominent US attorney specialising in bankruptcy proceedings, is now the CEO of FTX. He faces the arduous job of cleaning up the mess left by SBF and his team.
On September 14, the US Bankruptcy Court for the District of Delaware approved FTX’s request to sell $3.4 billion in cryptocurrencies, including Solana, Ethereum, Bitcoin, stablecoins and more.
FTX’s biggest holding is Solana, of which it holds $1.16 billion. Its second biggest holding is Bitcoin ($560 million), followed by Ethereum ($192 million) and Aptos ($137 million). It also holds $120 million in USDT and $119 million in XRP.
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