FTX filed a lawsuit against four former key executives at the crypto exchange, seeking to recover damages from their alleged misappropriation of funds.
In a July 20 complaint filed in a U.S. Bankruptcy Court, lawyers for FTX alleged that former CEO Sam Bankman-Fried, co-founder Gary Wang, former director of engineering Nishad Singh, and former Alameda Research CEO Caroline Ellison abused their control to commit one of the largest financial frauds in history.
“They commingled and misused corporate and customer funds, lied to third parties about the business of the FTX Group, joked internally about their tendency to lose track of millions of dollars in assets and impulsively bought companies with misappropriated funds without conducting any due diligence,” stated the FTX lawyers in the complaint.
Included in the list of alleged fraudulent transfers were promissory notes posted without any collateral, where Bankman-Fried borrowed $170 million from Alameda, while Wang and Singh borrowed $54 million and $25 million respectively. FTX claims that the former executives did not pay back any amount of these so-called loans and never intended to do so.
The lawyers also claim that Bankman-Fried transferred $10 million worth of misappropriated user funds to his father’s personal account, which he has allegedly been using to fund Bankman-Fried’s criminal defense.
Ellison reportedly used misappropriated funds to pay herself a $22.5 million bonus, of which she used $10 million to acquire a stake in the artificial intelligence firm AI Company in 2022. A year prior, the former Alameda CEO allegedly paid herself a $6 million bonus in cash – funds that also came from misappropriated FTX assets.
Other fraudulent transfers were made to acquire millions of dollars’ worth of luxury real estate in the Bahamas and fund venture investments at valuations far higher than fair market value, the FTX lawyers said.
While Ellison, Wang and Singh have all pleaded guilty to the charges against them from the U.S. Department of Justice, Bankman-Fried has pleaded not guilty and is scheduled to face trial in October.