FTX Accuses Bankman-Fried’s Parents of Helping ‘Plunder’ Company

A new lawsuit accuses alleged cryptocurrency fraudster Sam Bankman-Fried’s parents of their own malfeasance.

The suit, filed Monday (Sept. 18) by the bankrupt crypto exchange FTX, says that Joseph Bankman and Barbara Fried used their backgrounds as Stanford University law professors to help line their pockets as their son carried out his own alleged fraud during his time as head of the company.

“Bankman and Fried deployed their decades of experience as sophisticated law professors and veneer of legitimacy not to help the FTX Group, but rather to plunder it in order to enrich themselves and their pet causes,” the suit says.

Representatives for Bankman and Fried were not immediately available for comment. The lawsuit comes weeks before Bankman-Fried, 31, is due to stand trial in one of the largest fraud cases in American history.

The company says it hopes to recover millions in “fraudulently transferred and misappropriated funds,” and seeks damages resulting from “conscious, willful, wanton, and malicious conduct.”

According to the suit, FTX Trading paid nearly $19 million to purchase a luxury property in the Bahamas — where FTX had been based — known as “Blue Water.”

The suit also claims that “Bankman’s command of tax law and unique understanding of the FTX Group’s muddled corporate structure allowed him to facilitate the transfer of a cash gift totaling $10 million to himself and Fried” using company funds.

It adds that Bankman either knew or “should have known, the perilous financial state of the FTX Group, even as he moonlighted as an actor in a Super Bowl commercial and extracted millions of dollars from the FTX Group.”

Barbara Fried, meanwhile, served as “point person” for her son’s political contribution efforts, the suit says, and used her “access and influence” to benefit her political action committee Mind the Gap, which received “tens of millions” of dollars from FTX at her request.

“Bankman and Fried, tenured professors at what currently is ranked as the top U.S. law school, either knew—or ignored bright red flags revealing—that their son, Bankman-Fried, and other FTX Insiders were orchestrating a vast fraudulent scheme to profit and promote their personal and charitable agendas at the Debtors’ expense,” the suit says.

In an interview with PYMNTS CEO Karen Webster last year, Hanna Halaburda, associate professor at NYU Stern School of Business, said the collapse of FTX was a case of “very old-fashioned fraud,” rather than a failure of cryptocurrency.

“The exchange failed due to stealing and lying. And we already have laws against that,” Halaburda said. “Talking about FTX, it really doesn’t matter whether they were dealing in crypto and tulips bulbs, or pieces of gold. They were just mismanaging what they were the trusted custodians of.”