FTX Trading Ltd., the cryptocurrency exchange that declared bankruptcy, has initiated a lawsuit against its founder, Sam Bankman-Fried, and several high-ranking executives. The company seeks to recover millions of dollars and reverse transactions amounting to over $1 billion, which it deems dubious.
The lawsuit alleged that Bankman-Fried, Gary Wang, the co-founder of FTX, Nishad Singh, the former director of engineering, and Caroline Ellison, the former co-CEO of Alameda Research LLC, a key FTX unit, were involved in fraudulent transfers. These transfers allegedly benefited them personally but did nothing to aid FTX. One such instance involves Bankman-Fried and Wang allegedly taking $546 million from Alameda to acquire shares in Robinhood Markets Inc., using sham loans that required no collateral and offered below-market interest rates.
Adding to the complexity of the case, Bankman-Fried has been accused by US prosecutors of leaking writings by his ex-girlfriend, Caroline Ellison, to the press. This move is seen as an attempt to discredit her as a potential witness in his criminal fraud trial. Ellison, who pleaded guilty to fraud charges in the previous year related to the collapse of the cryptocurrency exchange, has agreed to cooperate with prosecutors in their case against Bankman-Fried.
Further allegations suggest that FTX executives and Ellison privately estimated that FTX.com owed customers over $8 billion in fiat currency that it was unable to repay. This revelation has added another layer to the ongoing legal proceedings.
Bankman-Fried is facing a total of 13 counts, including conspiracy to commit wire fraud and conspiracy to violate the anti-bribery provisions of the Foreign Corrupt Practices Act. If convicted on all counts, he could face over 155 years in prison, although the actual sentence is likely to be significantly lower if he is found guilty.
The case, known as FTX Trading Ltd., 22-11068, is currently being heard in the US Bankruptcy Court, District of Delaware, with the trial for Bankman-Fried is scheduled for October. John Ray, the new CEO of FTX, has been leading the charge in these lawsuits. He has been working with his advisors to recover funds that could be used to repay creditors, including customers whose cryptocurrency was held on the exchange before its collapse in November.
