FTX sues 'SBF' and former executives for $1B

By: Mark Jessy

FTX sues 'SBF' and former executives for $1B

July 21, 2023 6:55 AM

FTX has filed a lawsuit against ex-employees Sam Bankman-Fried, Caroline Ellison, Gary Wang, and Nishad Singh from both FTX and Alameda Research.

FTX has filed a lawsuit against its former chief executive officer Sam Bankman-Fried along with other former key officials of the now-defunct crypto exchange to collect over $1 billion dollars in purportedly misused cash. 

Ex-Alameda Research CEO Caroline Ellison, FTX co-founder Zixiao "Gary" Wang, former FTX engineering director Nishad Singh, and Bankman-Fried were named as defendants in a July 20 case→ filed in a United States Bankruptcy Court. 

According to the lawsuit, the former executives violated their fiduciary obligations by allegedly misappropriating consumer funds on a "continuous basis to finance luxury housing developments political and charitable contributions→, speculative investments, and other pet projects."


Taken from FTX's lawsuit against Bankman-Fried, Ellison, and others. Source: Kroll

Furthermore, the lawsuit claimed that they "abused their control" over FTX and its affiliated entities to execute "one of the largest financial frauds in history."

According to the suit, defendants fostered an atmosphere in which a handful of workers had "virtually limitless power" to oversee transfers of fiat and crypto assets, as well as the capacity to hire and fire staff with "no effective oversight" on how they exercised these rights.

Furthermore, FTX claimed that the previous executives issued over $725 million in shares to themselves "without [debtors] receiving any value in exchange."

FTX alleged Bankman-Fried and Wang stole an extra $546 million to invest in the trading platform Robinhood.

According to the report, Ellison received $28.8 million in bonuses and spent $10 million of the money on a stake in an artificial intelligence business.

At the same time, FTX claims that Bankman-Fried sent his father a "gift" of $10 million from his FTX US account on January 24, 2022.

The petition states that shortly thereafter, Bankman-Fried's father made six withdrawals totaling $6.75 million from the family's joint account at Morgan Stanley to his personal accounts at TD Ameritrade. According to FTX, the "gift" has been utilized to pay Bankman-Fried's legal defense. 

According to FTX, many of the alleged illegal transfers occurred while the exchange was bankrupt, which the defendants were well aware of. While FTX initially prohibited negative balance accounts, Bankman-Fried allegedly urged his associates to rewrite the exchange's coding.

"In or about July 2019, SBF instructed a number of his accomplices or persons acting at their direction to tweak the software to enable Alameda to continue maintaining a negative balance in its holdings on the exchange."

As a result of this change, FTX was able to sustain normal operations while running "very large deficits." By March 2022, Ellison had "privately assessed that the FTX exchange alone had a cash deficit of over $10 billion," according to the complaint.

After filing→ for Chapter 11 bankruptcy on November 11, 2022, the crypto exchange and its subsidiaries are currently governed by restructuring leader and CEO John Ray.