FTX targets founder and execs in $1B lawsuit: Questionable deals and island buyout plot
“Between February 2020 and November 2022, more than $1 billion in fraudulent transfers were made for the benefit of the defendants.”
Targeted in the suit are key people at FTX Congress: Bankman-Fried, former chief technology officer Gary Wang, former director of engineering Nishad Singh and former Alameda Research CEO Carolyn Ellison. The defendants created fraudulent transactions for their personal benefit at the expense of FTXs customers:
“Alameda had no restrictions on FTX's ability to use customer funds for its own purposes.”
Ellison, Wang and Singh have pleaded guilty to fraud and are assisting federal prosecutors, while Bankman-Fried has denied all charges and is due in court in October.
Allegations in the lawsuit include improper bonuses and unjust enrichment. Ellison transferred $22.5 million in Alameda's salary payments to a third party owned by FTX, Salameda Limited, “before finally being sent to Ellison's personal account on the FTX exchange.”
Meanwhile, Bankman-Fried was accused of backing out of a “paying agent agreement” in an alleged attempt to shore up FTX's initial public offering prospects, but it was a sham and the loan was given to Alameda Research.
However, “the same FTX lawyer [one year later] He produced another version of the bogus agreement showing no credit to Alameda, providing ‘payment services' only that Alameda would ‘complete payments'. . . As directed by FTX from time to time.'
The deal, which was allegedly called to mislead an outside auditor and prepare the company for an initial public offering, was part of a plan in which Alameda would not transfer any customer deposits to FTX, contrary to promises.
Ellison acknowledged the special privileges that allowed Alameda unlimited credit without the need for collateral or interest payments. She also admitted that many of these investments were deliberately made in Alameda's name to conceal the source and use of the funds.
“Ellison understands that FTX needs to use client funds to make more investments. […] And he admitted that many of the investments were ‘made in the name of Alameda rather than FTX to conceal the source and nature of those funds'.
Bankman-Fried allegedly misrepresented Alameda's $8 billion liability to prospective investors, further obfuscating its true financial condition.
It's amazing.
The lawsuit sheds light on the “frequently flawed and sometimes dystopian” plans at the FTX Foundation. They hinted at a plan between Gabriel Bankman-Fried – SBF's brother – and another executive to find the island nation of Nauru, aimed at creating effective humanitarian aid in the event of a major public disaster.
“To develop sensible regulation around human genetic modification and to build a laboratory there. ‘Maybe there are other things that would be useful to a sovereign state,'” the memo continued.
