The legal dispute surrounding the insolvency of cryptocurrency exchange FTX has taken an unforeseen twist, with Joseph Bankman and Barbara Fried, parents of the former CEO, Sam Bankman-Fried, seeking the dismissal of FTX’s legal action against them. The lawsuit alleges the parents’ involvement in the illicit transfer of funds from the struggling exchange.
FTX’s Pursuit of Fund Recovery
In September 2023, FTX initiated legal proceedings to reclaim “millions of dollars” from Joseph Bankman and Barbara Fried. They asserted that the funds were illegitimately transferred and that the parents knowingly profited from misconduct at FTX. However, within two months, SBF was found guilty on all seven charges related to defrauding customers and the United States. Furthermore, his sentencing is expected in March.
Also Read: SBF Earns Dubious Title of “Worst Witness” Amid High-Stakes Trial
Rejection of Allegations
Joseph Bankman and Barbara Fried, both professors at Stanford Law School, vehemently refute FTX’s allegations. They argue that Bankman had no fiduciary relationship with the firm and did not hold any official roles within the company. Additionally, they contend that even if a fiduciary relationship existed, the accusations do not reasonably establish a breach.
Legal Defense
Attorneys from Montgomery McCracken Walker & Rhoads, representing Bankman and Fried, challenge the legitimacy of FTX’s claims. They further assert that the parent-child relationship is not legally actionable, rejecting the notion of a fiduciary connection with FTX. The legal team underscores the insufficiency of facts in FTX’s complaint to substantiate the claim that the defendants are liable for the alleged misconduct.
Demand for Specificity
The court filing contests FTX’s assertion that the parents “knew or should have known” about the purported misconduct. It argues that FTX should have presented specific facts demonstrating the parents’ “actual knowledge” of actions leading to a breach of fiduciary duty. This position further indicates a call for a higher standard of proof from FTX.
Unspecified Appropriation
In its September 2023 lawsuit, FTX did not specify the total amount Joseph Bankman and Barbara Fried were accused of misappropriating. However, the lawsuit outlined certain line items, including Bankman’s yearly salary, property acquisitions, and FTX Group donations to Stanford University. Notably, the university has committed to returning the received donations.
Additionally, as the legal proceedings unfold, the case introduces a convoluted mix of accusations and counterarguments. Joseph Bankman and Barbara Fried’s motion for dismissal centers on challenging the foundation of the exchange’s claims, casting doubt on the existence of a fiduciary relationship, and urging precision in the allegations. The resolution of this legal dispute is poised to have far-reaching implications for the broader cryptocurrency industry and the accountability of individuals linked to crypto exchanges.
Also Read: FTX Reportedly Sold $500 Million Worth of Crypto in December 2023