The saga surrounding the collapse of crypto company FTX took another twist today after the bankrupt business unveiled a fresh lawsuit against its former boss Sam Bankman-Fried in a bid to recoup hundreds of millions of dollars.
The lawsuit alleges that Bankman-Fried, along with a number of other senior members of FTX including co-founder Gary Wang, participated in fraudulent transactions for their own personal benefit. That includes the pair having allegedly taken $546 million from Alameda Research, their privately-held crypto hedge fund, to buy shares in another trading app, Robinhood, as well as using fake loans to acquire shares in FTX that had been worth $250 million.
The legal action, which has been filed at the US Bankruptcy Court in Delaware, is part of efforts by FTX’s new CEO John Ray to recover funds that can be used to repay creditors, including customers who were frozen out of their crypto accounts after the company went bust in November last year.
“Defendants abused their control over the FTX Group to commit one of the largest financial frauds in history,” the lawsuit claims.
“Defendants misappropriated Debtor funds on a continuous basis to finance luxury condominiums, political and “charitable” contributions, speculative investments and other pet projects.
“They commingled and misused corporate and customer funds, lied to third parties about the business of the FTX Group, joked internally about their tendency to lose track of millions of dollars in assets and impulsively bought companies with misappropriated funds.”
In December, the US securities regulator charged FTX founder Sam Bankman-Fried with orchestrating a scheme to defraud investors.
The Securities and Exchange Commission has accused Bankman-Fried of being behind a years-long effort to conceal from investors the undisclosed diversion of FTX customers’ funds to Alameda.
SEC director Gurbir Grewal said: "FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service.
“But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent."
