Key Takeaways
- The lawsuit targets Sam Bankman-Fried, Caroline Ellison, Zixiao “Gary” Wang, and Nishad Singh, claiming that they created an environment in which a few staff had almost unrestricted power over fiat and crypto assets, allowing them to misuse the funds at will.
- FTX accuses the ex-executives of issuing equity worth over $725 million to themselves without providing any value in return to the debtors.
In the latest development in the FTX bankruptcy saga, the exchange had filed a lawsuit against its own founder, Sam Bankman-Fried (SBF), and several former executives, seeking to recover over $1 billion in allegedly misappropriated funds before FTX’s bankruptcy. The complaint was lodged in the Delaware bankruptcy court and accused the defendants of committing one of the largest financial frauds in history.
The lawsuit targets Sam Bankman-Fried, Caroline Ellison, Zixiao “Gary” Wang, and Nishad Singh, claiming that they created an environment in which a few employees had almost unrestricted power over fiat and crypto assets, allowing them to misuse the funds at will. Furthermore, the defendants allegedly granted themselves the authority to hire and fire employees without any effective oversight, perpetuating their fraudulent activities.
According to the complaint, the fraudulent transfers occurred between February 2020 and November 2022, leading to FTX’s Chapter 11 bankruptcy filing. FTX asserts that these transfers can be undone under the U.S. bankruptcy code or Delaware law.
FTX Trading also accuses the former executives of issuing equity worth over $725 million to themselves without providing any value in return to the debtors. This egregious action further exacerbated the financial strain on the company.
The lawsuit points to specific instances of alleged misappropriation, including Sam Bankman-Fried and Zixiao Wang’s purported misuse of an additional $546 million to purchase shares in the trading platform Robinhood. Additionally, Caroline Ellison allegedly paid herself $28.8 million in bonuses and diverted $10 million towards acquiring a stake in an artificial intelligence company.
In a startling revelation, FTX claims that Sam Bankman-Fried’s criminal defense is being funded by a $10 million “gift” he allegedly gave his father, Joe Bankman. Most of this $10 million was reportedly charged from FTX and transferred to Bankman-Fried’s Morgan Stanley and T.D. Ameritrade accounts around January of the previous year.
Moreover, two co-founders, Zixiao “Gary” Wang, and Nishad Singh, have also been named as beneficiaries of these purportedly illicit transfers. It is worth noting that Caroline Ellison, Zixiao Wang, and Nishad Singh have already pleaded guilty to charges of fraud in separate criminal cases unrelated to the present lawsuit. On the other hand, Sam Bankman-Fried has entered a not-guilty plea to U.S. criminal charges, including fraud, money laundering, and campaign finance violations.
Following FTX’s bankruptcy filing in November 2022, John J Ray III, who took over the liquidation process, had accused the company’s former management of “old-fashioned embezzlement.”
