Key takeaways:
- Parents of Sam Bankman-Fried Move to Dismiss ‘Threadbare’ FTX Lawsuit
- Stanford Law professors Bankman and Fried assert that Bankman lacked a fiduciary relationship with FTX.
In an unexpected turn of events, the legal dispute surrounding the insolvency of cryptocurrency exchange FTX has taken a new twist, with Joseph Bankman and Barbara Fried, the parents of former CEO Sam Bankman-Fried, seeking the dismissal of FTX’s legal action against them.
The lawsuit accuses the parents of involvement in the illicit transfer of funds from the struggling exchange, alleging that they knowingly benefited from misconduct within the firm and exploited their access and influence.
Bankman and Fried, both professors at Stanford Law School, are attempting to dismiss the lawsuit by arguing that it is merely capitalizing on their familial ties to Sam Bankman-Fried.
They contend that Bankman did not have a fiduciary relationship with FTX and did not serve “as a director, officer, or manager.” Even if a fiduciary relationship existed, the legal filing on January 15 argues that the plaintiffs have failed to plausibly allege a breach.
The estate of FTX filed the lawsuit in September 2023, aiming to recover “millions of dollars in fraudulently transferred and misappropriated funds” allegedly taken by the couple. The legal action also seeks to recover damages attributed to breaches of fiduciary duties and other alleged misconduct.
Bankman and Fried’s legal representatives reject the claim that Bankman had a fiduciary relationship with FTX and served as a de facto director.
They emphasize that mere conclusory allegations are insufficient, arguing that the complaint must contain sufficient facts allowing the court to draw a reasonable inference of the defendant’s liability for the alleged misconduct.
The court filing challenges FTX’s assertion that the parents “knew or should have known” about the purported misconduct.
It argues that FTX should have presented specific facts demonstrating the parents’ “actual knowledge” of actions leading to a breach of fiduciary duty. This stance indicates a call for a higher standard of proof from FTX.
FTX has actively been seeking to recover millions of dollars in cash and gifts from Joseph Bankman and Barbara Fried, including a $16.4 million villa in the Bahamas.
However, the parents’ legal representatives argue that neither a $10 million cash gift nor the Bahamas “Blue Water” property should be viewed as evidence of self-interest.
As the legal battle unfolds, the cryptocurrency community watches closely, awaiting the resolution of this complex and contentious case.
