Lawsuit alleges that Sam Bankman-Fried is using FTX funds to pay defense lawyers

Sam Bankman-Fried, co-founder of the unsuccessful cryptocurrency exchange FTX, faces a lawsuit in Delaware bankruptcy court alleging that he and members of his leadership team embezzled hundreds of millions of dollars.

The attorneys representing the bankrupt exchange are aiming to recover funds from Bankman-Fried and former executives of FTX and its sister hedge fund Alameda Research. One alleged method of embezzlement mentioned in the lawsuit is a $10 million gift to Bankman-Fried’s father, prominent legal scholar Joe Bankman.

A substantial portion of the $10 million gift was allegedly transferred from FTX to Bankman-Fried’s Morgan Stanley and TD Ameritrade accounts in January 2022. According to the lawsuit, those funds are now being used to cover Bankman-Fried’s legal defense expenses.

A representative for Bankman-Fried declined to provide a comment at this time.

Bankman-Fried was indicted on charges of fraud, bribery, and campaign finance violations following FTX’s bankruptcy filing in late 2022. The once-valued $32 billion exchange collapsed rapidly due to a lack of liquidity and the inability to meet customer withdrawal demands.

Bankman-Fried has pleaded not guilty, and his trial is scheduled to commence later this year.

FTX lawyers have been searching for the remaining assets of the company in order to maximize recoveries for creditors.

FTX and Alameda executives Caroline Ellison, Gary Wang, and Nishad Singh are co-defendants in this case, alongside Bankman-Fried.

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