Crypto

Sam Bankman-Fried’s parents sued over FTX fiasco

Sam Bankman-Fried's parents sued over FTX fiasco

A lawsuit accuses the FTX founder’s parents of getting rich off his fraud

Debtors of bankrupt cryptocurrency exchange FTX have begun legal action against founder Sam Bankman-Fried’s parents, alleging that Joseph Bankman was a “de facto officer” at FTX Group and that he and Barbara Fried were responsible for misappropriating millions of dollars through their roles in the company.

Sullivan & Cromwell is the law firm representing FTX debtors and debtors-in-possession and filed the lawsuit against SBF’s parents on September 18. The suit alleges that Bankman and Fried exploited their positions at FTX to misappropriate funds at the expense of FTX debtors in the bankruptcy estate, suggesting that SBF’s parents were “very much involved” in the FTX business from inception until its collapse.

“As early as 2018, Bankman described Alameda as a ‘family business’ — a phrase he repeatedly used to refer to the FTX Group. Even as the FTX Group descended into insolvency, Bankman and Fried profited handsomely from this’ family business,'” says the complaint.

The plaintiffs allege that Bankman, a Stanford Law School professor, had wide decision-making authority as FTX Group’s “de facto officer” and was also an FTX Group management team executive.

Fried is also a Stanford Law School professor who was actively involved in political donations at FTX, says the complaint. She served as the “single most influential advisor” in the company’s political contributions, often calling for FTX to donate millions of dollars to the political action committee Mind the Gap (MTG), which she co-founded.

FTX halted operations when it filed for Chapter 11 bankruptcy in November 2022. Bankman-Fried was arrested soon after and faces 13 charges, including money laundering, fraud, and attempting to bribe officials. The first of his two trials is scheduled for October 3, where he’s charged with seven counts of fraudulent activities concerning FTX and Alameda Research user funds.

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