Sam Bankman-Fried, the 31-year-old crypto entrepreneur, allegedly used stolen funds from FTX’s sister hedge fund, Alameda Research, to pay his legal defense team a whopping $10 million. According to a new lawsuit filed in Delaware bankruptcy court, the funds were transferred as a “Bankman Gift Transfer” from Bankman-Fried’s FTX account to his father’s personal account on the FTX US exchange. The lawsuit further claims that Bankman-Fried’s father has been using this supposed gift to finance his son’s criminal defense.
The complaint confirms earlier reports stating that Bankman-Fried utilized a “large monetary gift” to his father, Joseph Bankman, a law professor at Stanford University, to cover his expensive legal defense. The lawsuit reveals that in January 2022, Bankman-Fried initially transferred the $10 million, along with debtor assets, to his own FTX account before swiftly transferring the entire sum to his father’s account.
Interestingly, an email exchange between Bankman-Fried and his father suggests that they discussed structuring the $10 million as a loan from Alameda to Bankman-Fried, implying that the money may not have been a genuine gift. FTX’s lawyers noted that there is no evidence of a promissory note or any agreement indicating that the funds were not taken from Alameda by Bankman-Fried for personal gain.
The court documents were filed by FTX against several of its executives, including Bankman-Fried, co-founder Gary Wang, engineering director Nishad Singh, and former Alameda CEO Caroline Ellison. FTX is seeking $1 billion in damages, alleging that the company’s philanthropic organization was misused by its higher-ups.
This latest development springs from a case that started in November when Bankman-Fried’s crypto exchange collapsed following a report revealing his misappropriation of customers’ funds to support an extravagant lifestyle, including extensive advertising campaigns and substantial political donations. Bankman-Fried now faces multiple charges, including conspiracy to commit bank fraud and wire fraud against FTX customers, along with other related crimes. If convicted, he could potentially face a maximum sentence of 155 years in prison.
Bankman-Fried, who was released on an unprecedented $250 million bail bond after being extradited from the Bahamas, is reportedly staying at his parents’ residence in Palo Alto with an ankle monitor. The defense team representing Bankman-Fried, composed of prominent lawyers Mark Cohen and Christian Everdell from the New York-based firm Cohen & Gresser, has yet to comment on the matter. Caroline Ellison, the former CEO of Alameda, has also faced charges of misappropriating the firm’s funds and is expected to testify against Bankman-Fried during the upcoming trial in October. Cohen and Everdell, known for their expertise in litigation involving white-collar crime, are listed as key players in Cohen & Gresser’s website.
Bankman-Fried is not the only executive from the crypto firm facing potential imprisonment. Ellison, his former partner and Alameda’s ex-chief, had previously faced a sentence of over a century but managed to reach a plea deal with the federal government by agreeing to cooperate. While it remains uncertain how much her sentence will be reduced, experts speculate that the 28-year-old may serve no time at all after serving as the star witness in Bankman-Fried’s trial.
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