Defunct cryptocurrency exchange FTX is suing its founder and former CEO Sam Bankman-Fried for $1 billion in allegedly misappropriated funds.
The lawsuit, filed Thursday in Delaware, also names FTX’s former chief technology officer Gary Wang and former engineering director Nishad Singh; and names Caroline Ellison, former CEO of sister company Alameda Research.
FTX accuses the defendants of misappropriating funds to pay for luxury condominiums, to make speculative investments, and to make political contributions, all while they committed "one of the largest financial frauds in history."
Fraudulent transfers included more than $725 million of equity that FTX and sister company West Realm Shires awarded Bankman-Fried, Wang, Singh and Ellison “personally without receiving any value in exchange.”
Fraudulent transfers also included $546 million by Bankman-Fried and Wang, who used the funds to buy shares of Robinhood Markets, and $28.8 million transferred by Ellison as bonuses to herself. FTX alleged Thursday that these transfers were made while the exchange was insolvent and while executives knew it.
FTX also alleges that Bankman-Fried, Wang and Singh used sham loans to acquire FTX stock that was then worth $250 million.
“Defendants intentionally operated the FTX Group, as an integrated whole, without recognizing corporate formalities and separateness, in a manner that placed their own interests above those of the companies they were charged with managing,” the lawsuit alleged. “They created an environment in which a handful of employees had virtually limitless power to direct transfers of fiat currency and cryptocurrency and to hire and fire employees, with no effective oversight and no checks on how they exercised those broad powers.”
Current CEO John Ray, who took over the exchange when it filed for bankruptcy, previously said of FTX, “Never in my career have I seen such a complete failure of corporate controls and such a complete absence of trustworthy financial information as occurred here.”
Notably, Ray guided Enron through its bankruptcy proceedings. The once-$60 billion energy company filed for bankruptcy in 2001 after revelations of massive accounting fraud.