ankrupt crypto company FTX has launched a fresh lawsuit against its former boss Sam Bankman-Fried in a bid to recoup hundreds of millions of dollars.
The lawsuit alleges that Bankman-Fried, along with a number of other senior members of FTX, participated in fraudulent transactions for their own personal benefit rather than the benefit of the company.
“Defendants abused their control over the FTX Group to commit one of the largest financial frauds in history,” the lawsuit alleges.
“Defendants misappropriated Debtor funds on a continuous basis to finance luxury condominiums, political and “charitable” contributions, speculative investments and other pet projects that inured to the benefit of Defendants rather than the Debtor entities that paid for them.
“They commingled and misused corporate and customer funds, lied to third parties about the business of the FTX Group, joked internally about their tendency to lose track of millions of dollars in assets and impulsively bought companies with misappropriated funds without conducting any due diligence.”
Among a raft of allegations, Bankman Fried and co-founder Gary Wang are accused of having taken $546 million from Alameda Research, their privately-held crypto hedge fund, to buy shares in another trading app, Robinhood, as well as using fake loans to acquire shares in FTX that had been worth $250 million.
The lawsuit, which has been filed at the US Bankruptcy Court in Delaware, is part of efforts by FTX’s new CEO, John Ray, to recover funds that can be used to repay creditors, including customers who were frozen out of their crypto accounts after the company collapsed.
In December, the US securities regulator charged FTX founder Sam Bankman-Fried with orchestrating a scheme to defraud equity investors in the collapsed crypto exchange.
The Securities and Exchange Commission has accused Bankman-Fried of being behind a years-long fraud to conceal from FTX’s investors the undisclosed diversion of FTX customers’ funds to Alameda.
Gurbir S. Grewal, Director of the SEC’s Division of Enforcement, said: “FTX operated behind a veneer of legitimacy Mr. Bankman-Fried created by, among other things, touting its best-in-class controls, including a proprietary ‘risk engine,’ and FTX’s adherence to specific investor protection principles and detailed terms of service.
“But as we allege in our complaint, that veneer wasn’t just thin, it was fraudulent.”
FTX filed for bankruptcy on November 11, when it ran out of money after the cryptocurrency equivalent of a bank run.
Bankman-Fried, the former CEO, was arrested in the Bahamas at the request of the US government and is currently under house arrest at his parents’ Palo Alto home.