On Monday, bankrupt cryptocurrency exchange FTX sued Sam Bankman-Fried's parents. FTX accuses Stanford academics Joseph Bankman and Barbara Fried of profiting from the exchange at the expense of clients.
Sam Bankman-Fried, who is in detention and is suspected of using FTX clients' money for personal investments while defrauding them, is charged with operating FTX as a "family business." According to the complaint, he stole billions of dollars from customers' accounts to give to a small handful of insiders, including his parents.
Sean Hecker and Michael Tremonte, the attorneys for Bankman and Fried, vigorously refuted FTX's allegations. In a joint statement, they said the complaint was unfounded and that it was an effort to sabotage their child's upcoming trial.
"This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child's trial begins," the lawyers said, as quoted by Reuters.
What Did Sam Bankman-Fried's Parents Do?
According to the FTX complaint, the struggling exchange gave Bankman and Fried a $10 million cash gift and a $16.4 million luxury home in the Bahamas when it was about to collapse. They allegedly encouraged FTX to make large charity payments, especially to Stanford University.
Following accusations of mishandling and losing billions of dollars in cryptocurrency payments from consumers, FTX declared bankruptcy in November 2022. Since then, FTX has recovered assets worth over $7 billion to pay back clients. The exchange is also suing FTX executives and other individuals who received money from FTX before bankruptcy for further recovery.
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Following FTX's demise in November of last year, both Mr. Bankman and Ms. Fried came under heavy investigation. Professor Bankman, a tax scholar, was FTX's executive team member and took an active role in the company's philanthropy. He allegedly helped top staff get huge loans and complained about his $200,000 yearly income, according to the complaint.
The FTX lawsuit also alleges that Professor Bankman used a private aircraft to travel and charged FTX for $1,200 per night of hotel accommodations. Even in a minor role, he appeared with comedian Larry David in a 2022 Super Bowl FTX advertisement, according to The New York Times.
In addition, Professor Bankman is charged with trying to cover up claims made by a former FTX attorney about money laundering and price fixing at Bankman-Fried's firms. Bankman reportedly suggested looking into the lawyer rather than looking into these claims.
FTX never hired Barbara Fried, but the complaint claims that she was a key contributor to her son's work. She gave him political contribution advice and urged him and other executives to make "straw donations" to hide the FTX connection to the money.
Big Time Scam
Due to growing worries about its financial viability, FTX's collapse in November 2022 led to a significant loss of consumer cash and bankruptcy. Federal prosecutors dubbed the case as one of the biggest financial frauds in US history.
Sam Bankman-Fried, 31, will be tried on October 3 after pleading not guilty to multiple fraud and conspiracy charges, as reported by CNN. Several of his previous business partners have pleaded guilty in the Southern District of New York.
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