A recent court filing reveals that the parents of Sam Bankman-Fried (SBF), the former CEO of FTX, played a significant role in a salary dispute that resulted in millions of dollars of misappropriation.
Joseph Bankman, SBF’s father, was unhappy with his $200,000 annual salary at FTX US and enlisted his wife, Barbara Fried, to convince their son to pay them more.
The complaint alleges that SBF’s parents received lavish benefits from FTX Trading and Alameda, two entities affiliated with FTX, in exchange for their influence.
The Contract and the Complaint
Joseph Bankman is a professor of law and tax at Stanford Law School. In December 2021, he took a leave of absence from his academic position to join FTX US as its chief legal officer.
According to the complaint filed by FTX debtors on Sept. 18, 2021, in United States Bankruptcy Court for the District of Delaware, Bankman signed a contract with FTX US that stipulated a $200,000 annual salary.
However, Bankman apparently did not read or understand the contract, as he later claimed to both FTX US and his son that he was expecting a $1 million annual salary.
The complaint states that Bankman was “[p]utting Barbara on this”, implying that SBF’s mother may have been able to persuade her son to agree to the salary change.
The complaint further alleges that “Bankman’s influence paid off”, as SBF later provided his parents with various perks and payments from FTX Trading and Alameda, two entities that he controlled.
These included $10 million from Alameda, a $16.4 million property in The Bahamas funded by FTX Trading, the ability to expense roughly $90,000 to FTX Trading in The Bahamas, and options to purchase company stock.
The debtors claim that these benefits were not authorized by FTX US or its board of directors, and that they constituted misappropriation of funds that belonged to FTX US and its creditors.
The debtors are seeking to recover these funds from Bankman and Fried, as well as damages for breach of fiduciary duty, unjust enrichment, and fraudulent transfer.
The Bankruptcy and the Criminal Charges
The complaint against Bankman and Fried is part of the ongoing bankruptcy case involving FTX and many of its subsidiaries, which was filed in November 2022.
The bankruptcy was triggered by a series of events that exposed FTX’s fraudulent and illegal activities.
According to the indictment filed by the U.S. Department of Justice in June 2023, SBF and his co-conspirators engaged in a scheme to defraud investors and manipulate the cryptocurrency market through FTX and its related entities.
The indictment charges SBF with 12 criminal counts, including conspiracy, wire fraud, securities fraud, money laundering, and obstruction of justice.
SBF is facing two trials for these charges, one starting in October 2023 and another in March 2024. He has pleaded not guilty to all counts and maintains his innocence.
However, he has been denied bail since August 2023, after a federal judge found him to be a flight risk and a danger to the community.
He is currently being held at the Metropolitan Detention Center in Brooklyn, where he has limited access to the Internet and his lawyers.
On Sept. 19, 2023, a three-judge panel heard an appeal from SBF’s legal team requesting his release from jail pending trial.
They argued that SBF’s detention violated his First Amendment rights and hindered his ability to prepare for his defense. The panel has not yet issued a decision on the appeal.
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