FTX sued founder Sam Bankman-Fried, former top executives for over $1 billion

US prosecutors call Bankman-Fried mastermind of fraud that led to FTX collapse

FTX Trading sued founder Sam Bankman-Fried and other former executives of the cryptocurrency exchange on Friday, seeking to recover more than $1 billion allegedly embezzled prior to FTX’s bankruptcy.

The complaint filed in Delaware bankruptcy court also names as a defendant Carolyn Ellison, who led Bankman-Fried’s Alameda Research hedge fund; former FTX technology chief Zixiao “Gary” Wang; and former FTX engineering director Nishad Singh.

FTX said the defendants continually misappropriated funds to finance luxury condominiums, political contributions, speculative investments and other “cherished projects” while perpetrating “one of the largest financial frauds in history.”

FTX said the alleged fraudulent transfers took place between February 2020 and November 2022 when FTX filed for Chapter 11 protection, and can be undone — or “saved” — under the U.S. Bankruptcy Code or Delaware law.

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

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

US prosecutors have called Bankman-Fried the mastermind of the fraud that led to the collapse of FTX and involved the misappropriation of billions of dollars of customer funds.

Bankman-Fried has pleaded not guilty to several criminal charges. Ellison, Wang and Singh have pleaded guilty and agreed to cooperate with prosecutors.

According to Thursday’s complaint, the fraudulent transfers involved more than $725 million in equity that FTX and West Realm Shires, an entity controlled by Bankman-Fried, provided “without receiving any value in exchange.”

FTX said Bankman-Fried and Wang misappropriated $546 million to buy Robinhood Markets shares, while Ellison used $28.8 million to pay himself bonuses.

It also states that part of Bankman-Fried’s criminal defense is being funded by a $10 million “gift” she made to her father.

“The transfers were made when (entities related to FTX) were insolvent and the defendants knew this,” FTX said.

Federal law allows bankruptcy trustees to avoid transfers of assets made in the two years prior to the Chapter 11 filing if the transfers are made for less than their value and with the intent to defraud the bankruptcy assets.

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