 "Bankrupt FTX sues former CEO Sam Bankman-Fried to recover over $1 billion")
FTX Trading on Friday sued founder and former CEO Sam Bankman-Fried and other former executives in a bid to recover over $1 billion that was misappropriated before the company went bankrupt.
The complaint was filed in the Delaware bankruptcy court, and apart from Bankman-Fried, the cryptocurrency exchange has sued co-founder and former chief technology officer Gary Wang; former director of engineering Nishad Singh; and co-chief executive of Alameda Research Caroline Ellison, according to a report in the Mint.
FTX said that the defendants continually misappropriated funds to finance luxury condominiums and other "pet projects" while committing "one of the largest financial frauds in history".
The alleged fraudulent transfers occurred between February 2020 and November 2022 when FTX filed for Chapter 11 protection.
The lawsuit states that Bankman-Fried and Wang took out sham loans from Alameda that did not require them to provide any collateral and carried below-market interest rates with only Ellison's approval.
The company said that Bankman-Fried and Wang misappropriated $546 million in May 2022 to acquire shares of Robinhood Markets Inc. It is also alleged that Ellison used $28.8 million to pay herself bonuses, according to the Mint report.
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It also stated that some of Bankman-Fried's criminal defence is being funded from a $10 million "gift" he gave his father.
The fall of FTX
In November 2022, FTX collapsed following a report by CoinDesk stating potential leverage and solvency concerns involving FTX-affiliated trading firm Alameda Research.
The collapse of the cryptocurrency exchange shook the volatile crypto market, which lost billions at the time, falling below a $1 trillion valuation.
By November 2022, FTX CEO Bankman-Fried stepped down, and the company filed for bankruptcy. In the following hours, the company faced a possible hack in which hundreds of millions of tokens were stolen.
Bankman-Fried was arrested in The Bahamas and extradited to the US in late December. He pleaded innocent to all criminal charges on January 3, 2023. Ellison, Wang, and Singh had pleaded guilty and agreed to cooperate with prosecutors.
US prosecutors said that Bankman-Fried is the mastermind of a fraud that led to FTX's collapse and included the misappropriation of billions of dollars of customer funds.