FTX seeks to recoup over US$1B allegedly taken by Sam Bankman-Fried, others – National

FTX Trading sued crypto exchange founder Sam Bankman-Fried and other former executives on Thursday to recover more than US$1 billion it allegedly embezzled before FTX bankruptcy.

The complaint, filed in Delaware bankruptcy court, also names Caroline Ellison, the former head of Bankman-Fried’s Alameda Research hedge fund, as a defendant. Former FTX Technology Head Zixiao “Gary” Wang. Former FTX Engineering Director Nishad Singh.

FTX said the defendants committed “the largest financial fraud in history” while continuing to divert funds to finance luxury condominiums, political donations, speculative investments and other “pet projects.”

According to FTX, the allegations of fraudulent transfers arose between February 2020 and November 2022, when FTX applied for Chapter 11 protection, and could be reversed or “avoided” under U.S. bankruptcy or Delaware law.

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A Bankman-Fried spokeswoman declined to comment. Lawyers for the other defendants did not respond to requests for comment.

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FTX is now led by John Ray, who helped run Enron after the energy trader’s 2001 bankruptcy.

U.S. prosecutors have identified Bankman-Fried as the mastermind behind the fraud that led to the bankruptcy of FTX and involved the misappropriation of billions of dollars in customer funds.

Bankman-Fried pleaded not guilty to several criminal charges. Ellison, Wang, and Singh pleaded guilty and agreed to cooperate with the prosecution.

Thursday’s complaint said the fraudulent transfers involved more than $725 million in shares awarded “without receiving any consideration” by West Realm Shires, an entity controlled by FTX and Bankman-Fried.

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Bankman-Fried and Wang also diverted US$546 million to buy Robinhood Markets shares, while Ellison used US$28.8 million to pay himself a bonus, according to FTX.

It also said Bankman-Fried’s criminal defense costs were partly funded from a $10 million “gift” Bankman-Fried gave to his father.

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“The transfer occurred when[the FTX affiliate]went bankrupt and the defendants were aware of it,” FTX said.

Federal law allows a bankruptcy trustee to avoid the transfer of assets if, during the two years prior to the filing of Chapter 11 of the Federal Law, the transfer of assets has fallen below their value and was made with the intent to deceive the bankruptcy estate.

The action is FTX Trading Ltd et al. v. Bankman-Fried et al., Delaware Bankruptcy Court, No. 23-ap-50448. The main bankruptcy case is his In re FTX Trading Ltd et al, No. 22-bk-11068 in the same court.

(Reporting by Jonathan Stempel, New York; additional reporting by Mike Scarcera; editing by Leslie Adler)

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