FTX Sues SBF and Other Former Execs to Recover Over $1 Billion

FTX Trading, the once-leading cryptocurrency exchange, has launched a legal offensive against its former CEO, Sam Bankman-Fried (SBF), and several individuals from his inner circle. The exchange aims to recoup more than $1 billion, which they allege was misappropriated before the company’s demise and subsequent bankruptcy filing. The accusations shed light on what the current management team labels as “one of the largest financial frauds in history.”

Allegations of a Gigantic Crypto Scam

Numerous regulators and investors who suffered significant losses have long accused the previous management team of orchestrating a massive crypto scam that ultimately led to the downfall of FTX Trading. Now, the company itself seems to be supporting these claims as it files a complaint in Delaware’s bankrupt court.

According to the complaint, SBF and his associates are accused of swindling over $1 billion in customer funds between February 2020 and November 2022. This period coincides with the time when the exchange filed for bankruptcy protection, leaving many investors in turmoil. The funds were allegedly used to finance political campaigns, purchase luxury apartments, engage in speculative investments, and fund various personal “pet projects.”

FTX Trading contends that the fraudulent transfers included more than $725 million of equity that the exchange and its affiliated company, West Realm Shires, awarded “without receiving any value in exchange.” Additionally, it is claimed that SBF and Zixiao “Gary” Wang misappropriated $546 million to purchase Robinhood shares, while Caroline Ellison, the leader of Alameda Research, reportedly used nearly $29 million to pay herself bonuses.

Debt Recovery and Future Outlook

The legal issues for Sam Bankman-Fried continue to mount, with the latest accusations coming from the very company he once led. FTX Trading’s current CEO and Chief Restructuring Officer, John J. Ray III, has been a vocal critic of the previous management team, alleging that they commingled customer deposits and corporate funds from the inception of FTX.com in 2019. Ray claims that former employees even deceived banking institutions by misrepresenting Alameda Research as a trading firm for transactions.

With FTX Trading claiming that the former crypto giant owed users a staggering $8.7 billion in November 2022, the current management team has been working diligently to reduce this debt. They assert that they have successfully recovered $7 billion in liquid assets so far, highlighting their commitment to restoring trust in the exchange and compensating affected users.