FTX Trading has taken legal action against its former CEO, Sam Bankman-Fried (SBF), and certain individuals within his inner circle, aiming to recoup more than $1 billion in funds allegedly misappropriated before the company’s collapse.
Numerous regulatory bodies and investors who suffered substantial losses have previously accused the previous management team of orchestrating a massive crypto scam, resulting in multi-billion-dollar losses. FTX Trading has now echoed these accusations, asserting that the unraveling of the crypto platform was a result of “one of the largest financial frauds in history.”
According to a complaint recently filed in the Delaware bankruptcy court, as reported by The Economic Times, Bankman-Fried stands accused of swindling over $1 billion in customer funds between February 2020 and November 2022, the period during which the exchange sought bankruptcy protection.
FTX Trading has additionally implicated three other individuals in the matter. Caroline Ellison, the former leader of Alameda Research, Zixiao “Gary” Wang, the ex-FTX executive, and Nishad Singh, the former engineering director, have been named in connection with the misappropriation.
The complaint alleges that Bankman-Fried and his associates utilized the misappropriated funds for various unauthorized purposes, including financing political campaigns, acquiring luxury apartments, engaging in speculative investments, and funding other personal “pet projects.”
FTX Trading further contends that fraudulent transfers encompassed over $725 million of equity that was awarded by the once-leading crypto platform and West Realm Shires without receiving any valid consideration in return.
Among the specific allegations, Bankman-Fried and Wang are accused of diverting $546 million to purchase shares of the popular stock trading platform, Robinhood. Meanwhile, Ellison allegedly used nearly $29 million to pay herself bonuses.
FTX and FTX Trading CEO Reveals Allegations Against Previous Management
In a recent development, John J. Ray III, the current CEO and Chief Restructuring Officer of FTX, made scathing remarks about the previous management team of the cryptocurrency exchange. Ray accused the former executives of questionable practices, including commingling customer deposits since the exchange’s inception in 2019 and deceiving banking institutions by misrepresenting Alameda Research as a trading firm for transactions.
According to Ray, the FTX Group projected an image of being a customer-centric leader in the digital age, but he claims it was merely a mirage. He alleged that customer deposits and corporate funds were commingled and misused by the previous senior executives, leading to significant concerns about the management’s transparency and fiduciary responsibilities.
Moreover, the CEO revealed that in November 2022, the former crypto giant owed users a staggering $8.7 billion. However, since the new management took charge, they have been diligently working to address the debt issue. So far, they have successfully recovered $7 billion in liquid assets, showcasing significant progress in rectifying the financial situation.
The allegations have raised eyebrows within the crypto community, and investors are closely monitoring the situation. Transparency and trust are crucial factors in the cryptocurrency industry, and any revelations about mismanagement can have far-reaching implications for the exchange’s reputation and user confidence.