FTX Trading sued founder Sam Bankman-Fried and other former executives of the cryptocurrency exchange, seeking to recoup more than $1 billion allegedly misappropriated before the company went bankrupt.
The complaint filed in Delaware bankruptcy court also names as defendants Caroline 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 “pet projects,” while committing “one of the largest financial frauds in history.”
The alleged fraudulent transfers occurred between February 2020 and November 2022 when FTX filed for Chapter 11 protection, and can be undone or “avoided” under the US bankruptcy code or Delaware law, FTX said.
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 a fraud that led to FTX’s collapse and included 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 the complaint, the fraudulent transfers included more than $725 million of equity that FTX and West Realm Shires, an entity that Bankman-Fried controlled, awarded “without receiving any value in exchange.”
FTX said Bankman-Fried and Wang also misappropriated $546 million to buy shares of Robinhood Markets, while Ellison used $28.8 million to pay herself bonuses.
It also said some of Bankman-Fried’s criminal defense is being funded from a $10 million “gift” he gave his father. “The transfers were made when (FTX-related entities) were insolvent, and defendants knew it,” FTX said.
Federal law lets bankruptcy trustees avoid transfers of property made in the two years before Chapter 11 filings, if the transfers are made for less than their value and with an intent to defraud a bankruptcy estate.
