FTX, the now-bankrupt cryptocurrency exchange, has filed a lawsuit against its former CEO, Sam Bankman-Fried, and other key executives, seeking to recover over $1 billion in alleged misappropriation. The complaint was submitted to the US Bankruptcy Court t on July 20, and it names former Alameda Research CEO Caroline Ellison, FTX co-founder Zixiao “Gary” Wang, former FTX director of engineering Nishad Singh, and Bankman-Fried as defenders.
According to the lawsuit, FTX accuses the former executives of breaching their fiduciary duties by misappropriating client funds for personal use, such as financing luxury apartments, political and charitable donations, speculative investments, and other personal projects. The suit allegations that the defenders abused their control over FTX and its related companies to commit one of the largest financial frauds in history. FTX claims that a small number of employees had nearly unlimited powers to oversee transfers of fiat and crypto assets without e effective perspective.
The lawsuit also accuses Bankman-Fried and Wang of misappropriating $546 million to purchase stock in trading platform Robinhood, while Ellison paid himself $28.8 million in bonuses and used $10 million of it to buy a stake in an artificial intelligence company Additionally, Bankman-Fried allegedly transferred $10 million as a gift from his FTX US account to his father's account on the same exchange, which was later used to fund his legal defense.
FTX alleges that many of the fraudulent transfers occurred when the exchange was insolvent, and the defenders were aware of the situation. Bankman-Fried reportedly instructed colleagues to modify the exchange's code to allow for negative balances, enabling FTX to continue operations despite running a significant deficit. By March 2022, Ellison estimated that the FTX exchange would have a cash deficit of over $10 billion.
The lawsuit seeks to hold the former executives accountable for their alleged actions and recover the misappropriated funds to address the financial losses incurred by the exchange.
