In an unforeseen development, the cryptocurrency exchange platform which had made it to the top headlines with its steep rise followed by subsequent bankruptcy has taken legal action against its founder and CEO, Sam Bankman-Fried’s parents, Barbara Fried and Joseph Bankman.
The lawsuit alleges the fraudulent transfer and misappropriation of millions of dollars in funds. As per the court filing made on Monday the debtors of FTX and its affiliated entity, Alameda Research, filed a complaint against Sam Bankman-Fried’s parents accusing them of breaching the fiduciary duties and other alleged misconduct.
The Collapse of FTX
The cryptocurrency exchange platform, FTX, founded by Sam Bankman-Fried witnessed a meteoric rise followed by a subsequent financial collapse in no time. Many reports unveiled that Alameda has investments in FTT, the token founded by its sister company, FTX.
This was followed by Binance, the world’s leading crypto exchange, announcing that it would sell its entire position in FTT eventually leading to FTX’s liquidity crisis. Though Bankman-Fried attempted to regain the trust of investors, they demanded a withdrawal worth $6 billion immediately.
The company was compelled to file for bankruptcy with Bankman-Fried being replaced by a court-appointed CEO with restructuring experience. The former CEO was jailed and extradited to the United States to confront a series of criminal and civil allegations. The class-action lawsuit filed in the Florida Federal Court accused Bankman-Fried of crafting a fraudulent cryptocurrency scheme to take advantage of US investors. It also included the names of celebrities and professional athletes who assisted Bankman-Fried in any way to promote the plan.
Legal Action Against Sam Bankman-Fried’s Parents
The debtors of FTX and its affiliated entity, Alameda Research filed a legal case against Sam Bankman-Fried’s parents, Joseph Bankman and Barbara Fried on Monday to recover damages caused by their breach of fiduciary duties and misconduct.
The filing stated that Bankman and Fried knowingly misused their access and influence within the FTX enterprise for personal gains at the expense of debtors and creditors in the Chapter 11 cases. The filing stated that FTX was more of a family business despite its claims to be a sophisticated group of crypto exchanges and businesses.
Bankman and Fried are accused of siphoning millions of dollars from the business and using them for pet causes. One notable example was their purchase of a $16.4 million property in the Bahamas, referred to as “Blue Water” or “Old Fort Bay”. The filing further revealed that the total cash payment for this acquisition amounted to $18.9 million inclusive of the fees and taxes.
The couple was indulged in donating tens of millions of dollars for political and charitable causes including to Stanford University to boost their professional and social status at the expense of the company.
The lawsuit filed by FTX against its founder’s parents is a stark reminder that even in the digital and decentralized world transparency and ethical conduct is the prime factor.
This legal battle is seen to spark conversation about the boundaries between family ties and business in the cryptocurrency industry. As DeFi is rapidly redefining the financial landscape, the stakeholders need to maintain their highest level of integrity for continued growth and legitimacy.
Disclaimer: This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
