FTX Sues Founder Sam Bankman-Fried and Three Others for $1bn

FTX Sues Founder Sam Bankman-Fried and Three Others for $1bn – The bankrupt cryptocurrency exchange FTX has filed a lawsuit against its founder, Sam Bankman-Fried, and three former executives, seeking $1 billion (£780 million) in damages. FTX experienced a financial collapse in November, and subsequently, Bankman-Fried was apprehended the next month in the Bahamas on accusations of embezzling customer funds. 

He was then extradited to the United States, where he pleaded not guilty to charges of fraud, conspiracy to violate campaign finance laws, and attempting to bribe Chinese authorities. Under the leadership of the restructuring expert John Ray, who now serves as FTX’s chief executive, the executive team has initiated a new lawsuit. 

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This legal action aims to reverse a series of transactions, including share awards, property purchases, and cash transfers, which the company believes should be nullified according to US bankruptcy law. John Ray’s primary objective with this lawsuit is to recover assets that he claims rightfully belong to creditors, including individual customers who lost access to their assets when FTX suspended withdrawals last autumn. 

The estimated value of the missing investor assets is around $1 billion. The lawsuit targets not only FTX’s founder, Sam Bankman-Fried, but also Gary Wang, the co-founder and former chief technology officer. Nishad Singh, FTX’s former director of engineering, and Caroline Ellison, the former chief executive of Alameda Research, which is a trading firm and key FTX unit founded by Bankman-Fried, are also named as beneficiaries of the alleged illicit transfers.

It’s worth noting that last year, Ellison, Wang, and Singh pleaded guilty to various charges, including fraud, in separate criminal cases related to the collapse of FTX. These cases are unrelated to the current lawsuit. If convicted over the separate US criminal charges at his trial due to start on 2 October, Bankman-Fried faces a possible sentence of decades in prison.

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In a court filing in November, Ray, who has overseen some of the biggest bankruptcies, said that the situation at FTX was “unprecedented”, and that the group behind FTX were, “inexperienced, unsophisticated and potentially compromised individuals.” He added: “Never in my career have I seen such a complete failure of corporate control and such a complete absence of trustworthy financial information.”

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