Cryptocurrency company FTX has taken legal action against its former CEO Sam Bankman-Fried and other former executives in an effort to recover over $1 billion. The lawsuit accuses Bankman-Fried and his associates of engaging in fraudulent transactions for personal gain rather than acting in the best interest of the company.
The lawsuit alleges that the defendants misappropriated funds belonging to FTX to finance luxury condos, make political and charitable contributions, invest speculatively, and pursue personal projects. It claims that they mixed and misused corporate and customer funds, deceived third parties about FTX’s business, and carelessly purchased companies without conducting proper due diligence.
Bankman-Fried and co-founder Gary Wang are specifically accused of using $546 million from their crypto hedge fund, Alameda Research, to buy shares in the trading app Robinhood. They are also accused of using fake loans to acquire FTX shares worth $250 million.
The lawsuit has been filed in the US Bankruptcy Court in Delaware as part of FTX’s efforts to recover funds and repay its creditors, including customers whose crypto accounts were frozen when the company collapsed. FTX’s new CEO, John Ray, is leading the recovery efforts.
This legal action comes after the US Securities and Exchange Commission (SEC) charged Sam Bankman-Fried with orchestrating a fraudulent scheme to defraud equity investors in the now-defunct crypto exchange. The SEC alleges that Bankman-Fried concealed the diversion of FTX customers’ funds to Alameda for several years.
According to the SEC, FTX operated under a false appearance of legitimacy created by Bankman-Fried, who touted the company’s strong controls and investor protection measures. However, the SEC claims that this facade was nothing more than a fraudulent deception.
FTX filed for bankruptcy in November after running out of funds, leading to a virtual bank run. Bankman-Fried was subsequently arrested in the Bahamas on the request of the US government and is currently under house arrest in his parents’ Palo Alto home.
The legal proceedings against Bankman-Fried and the other former FTX executives seek to hold them accountable for their alleged fraudulent actions and recover the funds necessary to repay FTX’s creditors, including affected customers.
