The estate for bankrupt crypto exchange FTX is looking to recover over $1 billion in cash and shares from founder Sam Bankman-Fried and other executives it alleges were fraudulently transferred to themselves.
The new lawsuit, filed Thursday, alleges that the defendants used their close control over the FTX Group's businesses and systems to perpetrate what it calls a massive fraud between February 2020 and November 2022, squandering FTX’s assets on luxury homes, political and "charitable" contributions, and various investments.
According to the filing, FTX issued more than $725 million worth of equity to Bankman-Fried, former CTO and Co-Founder Gary Wang, Director of Engineering Nishad Singh, and former Alameda Research CEO Caroline Ellison. Of this $725 million, $447.8 million allegedly went to Singh, and the lawsuit documents how it was recorded as a loan between Singh, trading arm Alameda and FTX.
“In reality, no one paid for the shares, and no one intended to do so,” the lawsuit reads.
The lawsuit also alleges that FTX transferred $4.86 million to the group in order to purchase real estate, and Bankman-Fried’s father, Allen “Joe” Bankman, received $10 million from Alameda to be used for legal expenses.
It also says that Gabriel Bankman-Fried, Sam’s brother, planned to purchase the nation of Nauru – a small island northeast of Australia – with FTX Foundation funds, and more than $100 million in political donations to both parties and political action committees were made from funds mixed with FTX customer money.
Caroline Ellison, who has a plea agreement with the U.S. Attorney’s Office of the Southern District of New York, is accused of awarding herself a $22.5 million bonus at the height of FTX’s crisis last November.
Recently, the U.S. Department of Justice asked a court to silence Bankman-Fried from making out-of-court statements about the case after he leaked Ellison’s private diary to the New York Times.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish group, owner of Bullish, a regulated, institutional digital assets exchange. Bullish group is majority owned by Block.one; both groups have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.