The FTX-Alameda conglomerate’s US bankruptcy trustee has filed a lawsuit against SBF’s parents, Allan Joseph Bankman and Barbara Fried. According to the trustee, Bankman Sr. was not only a witness to SBF’s alleged criminal acts, but had also performed management roles and made or influenced crucial decisions for years. He and his life partner Fried are accused of stealing millions of dollars from the corporation while also enriching themselves personally. SBF controlled Alameda Research, a cryptocurrency speculative fund, and FTX, a cryptocurrency exchange.
Bankman Sr. reportedly knew, or should have known, that the money did not belong to FTX but was a deposit from a customer, and that FTX had been insolvent for years. When an internal whistleblower revealed serious charges concerning bitcoin price manipulation, money laundering, and other illegal actions, Bankman Sr. declined to investigate. Instead, he attempted to silence the alert. Furthermore, Bankman Sr., a well-known tax law specialist, devised arrangements to relocate FTX assets abroad, rendering them inaccessible to U.S. bankruptcy procedures.
Lawyers for the defendants call the charges “completely false,” claiming that the case is intended to undermine their son SBF’s defense in his criminal proceedings. Fried and Bankman have long been instructors at Stanford Law School. Bankman also works as a clinical psychologist.
The Complaints
The bankruptcy trustee details scenarios that read like a soap opera in more than 60 pages. Bankman Sr. began overseeing Alameda and FTX in 2019 as one of seven managers, first unofficially, then officially unpaid, beginning in 2021. By the end of 2021, he had resigned from his professorship and had formally joined FTX US, the cryptocurrency exchange’s U.S. subsidiary, with an annual salary of $200,000.
This was insufficient for Bankman Sr., who complained to his son, according to the lawsuit. SBF then transferred $10 million in consumer cash to his parents. Officially, SBF borrowed $10 million from Alameda, a pittance compared to the $250 million he had already borrowed from the corporation. The $10 million was paid promptly to his parents, ostensibly to postpone taxes on the dividend until a later date—when CEO SBF would forgive the loan.
Furthermore, using FTX customer deposits, Bankman Sr. and Fried purchased a property in the Bahamas for more than $18.9 million. The land was given to the parents free of charge. FTX even bought furniture, vases, and a hand-knotted Persian rug for the property, as well as taking care of continuing operational bills, cleaning, and so on. The corporation also paid $15,000 for SBF’s parents’ permanent resident visas in the Bahamas. According to the Bahamian bankruptcy trustee, the couple has subsequently returned the property, although they are still registered as owners with the US bankruptcy trustee.
Bankman Sr. also obtained stock options, claimed lavish travel expenditures, and had $5.5 million contributed to Stanford University from FTX customer cash. He even paid for a previous student’s trip to France, including Formula One tickets. This man afterwards became an FTX lawyer.
Millions of Dollars Donated to Fried’s Political Agenda
SBF’s mother Fried officially retired with the increased cash; in actuality, she continued to run her company, MTG, a Political Action Committee (PAC). Her stated purpose was to obscure the donors’ identities as much as possible.
Large sums of money were purportedly deposited by FTX customers. Fried determined on her son’s behalf how much and what he should donate to various charities. To conceal the source of the donations, SBF was sometimes named as the contributor, sometimes as one of the FTX-Alameda companies, and sometimes strawmen were utilized. Another FTX manager has already pled guilty to being a strawman. FTX also handled Fried’s company’s operating expenses.
Bankman Sr.’s sister was also hired by FTX, earning $14,000 a month. She coordinated a $2.3 million hackathon in Florida and conducted a charity campaign in Florida. The complaint makes no legal allegations against her but paints her acts as futile. Only 1,200 participants attended the hackathon at the 19,000-person FTX Arena. Over the course of 19 years, FTX paid $135 million for the naming rights to a basketball stadium in Miami. Because FTX is no longer able to pay, the stadium has been renamed.
The Needs
According to the lawsuit, Bankman Sr. must have known that FTX and Alameda were insolvent throughout his involvement. When the end was near, he attempted but failed to arrange a sale to competitor Binance. He had an appointment with the Prime Minister of the island nation the day before filing for creditor protection.
Legally, Bankman Sr. and his partner Fried are accused of aiding and abetting breach of trust, unjust enrichment, fraudulent transfer of assets in the context of bankruptcy law, fraud, and unfair claims, with Bankman Sr. alone accused of breach of trust. This is not a criminal charge. Damages, disgorgement of ill-gotten riches, asset recovery, restitution of expenses, accounting for usage of the luxury property in the Bahamas, punitive damages, interest, and legal costs are among the demands.
The lawsuit is named Alameda Research et al v Allan Joseph Bankman et Barbara Fried and is now underway in the United States Bankruptcy Court for the District of Delaware. It is a component of bigger creditor protection proceedings. Case number 22-11068 is in the matter of FTX Trading Ltd et al.