July 20 (Reuters) – FTX Trading on Thursday sued founder Sam Bankman-Fried and other former cryptocurrency exchange executives, seeking to recover more than $1 billion allegedly embezzled prior to FTX’s bankruptcy.
The suit, filed in Delaware bankruptcy court, also names defendants Carolyn Ellison, who led Bankman Fried’s Alameda Research hedge fund. former FTX CTO Zixiao “Gary” Wang; and former FTX Engineering Director Nishad Singh.
FTX said the defendants continued to embezzle funds to fund luxury condominiums, political contributions, speculative investments and other “small ventures,” while committing “one of the largest financial frauds in history.”
FTX said the alleged fraudulent transfers occurred between February 2020 and November 2022 when FTX filed for Chapter 11 protection, and could be undone — or “avoided” — under US bankruptcy law or Delaware law.
A Bankman-Fried spokesperson declined to comment. Lawyers for the other defendants did not immediately respond to requests for comment.
FTX is now led by John Ray, who helped run Enron after the energy trader went bankrupt in 2001.
US prosecutors have named Bankman Fried as the mastermind of a fraud that led to the collapse of FTX, and involved the misappropriation of billions of dollars of customer funds.
Bankman-Fried pleaded not guilty to several criminal charges. Ellison, Wang, and Singh pleaded guilty and agreed to cooperate with prosecutors.
According to Thursday’s complaint, the fraudulent transfers involved more than $725 million in shares awarded to FTX and West Realm Shares, an entity controlled by Bankman-Fried, “without receiving any value in return.”
FTX said Bankman-Fried and Wang also misappropriated $546 million to buy shares of Robinhood Markets (HOOD.O), while Ellison used $28.8 million to pay itself bonuses.
It also said that some of Pinkman-Fried’s criminal defense was being funded by a $10 million “gift” to his father.
“The transfers were made when (the entities associated with FTX) were insolvent, and the defendants knew this,” FTX said.
Federal law allows bankruptcy trustees Avoid moving property They were made in the two years prior to the Chapter 11 filings, if the transfers were made undervalued and with intent to defraud a bankruptcy estate.
The case is FTX Trading Ltd and Others v Bankman-Fried et al, US Bankruptcy Court, County of Delaware, No. 23-ap-50448. The main bankruptcy case is that of FTX Trading Ltd and others in the same court, No. 22-bk-11068.
(Reporting by Jonathan Stempel) in New York. Additional reporting by Mike Scarella. Editing by Leslie Adler
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