FTX Sues Sam Bankman-Fried’s Parents: “Exploited Access… To Enrich Themselves”
In a recent court filing on Monday, the bankruptcy estate of FTX has taken legal action against the parents of its founder, Sam Bankman-Fried. The aim is to recover millions of dollars that the estate claims were fraudulently transferred and misappropriated.
Contained within the sprawling 63-page lawsuit is the assertion that FTX, despite presenting itself as a sophisticated cryptocurrency exchange, was essentially a “family business” fueled by fraudulent practices. Allan Joseph Bankman, Sam Bankman-Fried’s father and a respected tax law professor at Stanford Law School, is alleged to have played a pivotal role in perpetuating this culture of misrepresentation and poor management. Moreover, he is accused of concealing allegations that could have exposed the fraudulent activities within the company.
He is accused together with Bankman-Fried’s mother, Barbara Fried.
“As Bankman-Fried’s parents, Bankman and Fried exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars, and knowingly at the expense of the debtors in these Chapter 11 Cases and their creditors,” the firm said in its suit.
The lawsuit also contends that Bankman-Fried’s parents personally diverted millions of dollars from the cryptocurrency empire for their own gain, and the estate is now pursuing these funds as part of its bankruptcy proceedings.
Since FTX’s collapse in November, the bankruptcy estate, led by former Enron steward Jon Ray III, has been actively seeking to recover substantial sums of money distributed to politicians, corporations, and former members of FTX’s inner circle.
These legal actions have offered a critical examination of the failures within Bankman-Fried’s project. For example, a lawsuit filed in July took aim at FTX Europe, asserting that the exchange had paid nearly $400 million for what was essentially a $2 million regulatory license. Another lawsuit from the same month detailed instances of mismanagement by former executives and family members, including revelations that Bankman-Fried’s brother had contemplated purchasing the island nation of Nauru using FTX funds to establish a philanthropic community in preparation for potential disasters.
What sets this latest lawsuit apart is its focus on Bankman-Fried’s parents, both of whom are respected academics at a prestigious university. Fried is a renowned philosophy professor at Stanford, and Joe Bankman holds a tenured position in the law school.
In response to the allegations, Sean Hecker, counsel for Bankman, and Michael Tremonte, counsel for Fried, released a statement denying the claims and suggesting that the lawsuit was an attempt to undermine the upcoming trial of their child. They characterized the claims as entirely false and questioned the substantial fees being incurred by Ray and his legal team while providing limited returns to FTX clients.
The lawsuit aligns with recent reporting on the roles played by Bankman-Fried’s parents in the ascent of FTX. It alleges that Bankman actively supported the exchange’s development, proudly highlighting his early investment in trading firm Alameda and offering guidance on corporate and tax matters. He assumed a formal role as the senior advisor of the FTX Foundation and operated as a de facto officer, director, and manager within the broader corporation.
Despite presenting himself as a responsible figure, the FTX estate argues that Bankman chose to remain silent rather than raise concerns about misconduct, actively working to suppress efforts to expose the fraudulent activities.
While Fried had a less active role, the lawsuit asserts that she described herself as her son’s “partner in crime of the noncriminal sort,” particularly in advising on political donations—a critical aspect of the criminal case against Sam Bankman-Fried and other FTX executives.
The FTX estate contends that Bankman and Fried either had knowledge of the fraudulent scheme orchestrated by their son or willfully ignored red flags. They allegedly enriched themselves during this period, receiving a $10 million cash gift and acquiring a $16.4 million luxury property in the Bahamas. Bankman arranged for luxurious accommodations, plane tickets, and Formula 1 Grand Prix tickets for a Stanford Law School student who later served as outside counsel to FTX.
Not all of these alleged benefits were financial. According to the lawsuit, Bankman secured a cameo appearance alongside comedian Larry David in a 2022 FTX Super Bowl commercial, emphasizing his interest in this unique opportunity.
“I’m not a star-fucker and don’t really care about meeting, say, Tom Brady,” the lawsuit cited Bankman. “But Larry David…”
Information for this briefing was found via Fortune and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
