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FTX sues founder’s parents for siphoning off millions to ‘enrich themselves’

Barbara Fried
Barbara Fried allegedly asked FTX staff to place orders for items including a sofa, eight vases and a $2,500 Persian rug - EDUARDO MUNOZ/REUTERS

The parents of disgraced cryptocurrency entrepreneur Sam Bankman-Fried have been accused of siphoning off millions of dollars in “misappropriated funds” from FTX.

Claims against Joseph Bankman and Barbara Fried have been made in a lawsuit by administrators of FTX, as the crypto company seeks to claw back cash that they allegedly received prior to its collapse.

FTX has alleged the pair “exploited their access and influence” at the business to “enrich themselves”, as they benefitted from perks such as luxury hotel stays and the use of private jets.

They are demanding that Mr Bankman, a law professor at Stanford University, return a sum of $18.9m (£15.2m) allegedly used to pay for a beach house in the Bahamas.

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He is said to have grown “deeply enmeshed in” FTX’s operations after its launch in 2021.

The professor allegedly received “millions of dollars in unearned ‘gifts’ and real property, flew on privately chartered jets, expensed $1,200 per night hotel stays to the FTX Group, and even appeared in a Super Bowl commercial”.

Joseph Bankman
Joseph Bankman, a law professor at Stanford University, is accused of spending $18.9m on a beach house in the Bahamas - EDUARDO MUNOZ/REUTERS

As for the $18.9m beach house, referred to as “Blue Water”, lawyers for FTX claim they charged the business for luxury furnishings.

Ms Fried allegedly asked FTX staff to place orders for items including a sofa, eight vases and a $2,500 Persian hand-knotted rug.

At one point, Mr Bankman is said to have emailed a senior FTX executive: “We are hoping you can all come to celebrate the house you helped us buy/move into.”

Bankruptcy administrators from Kroll are also trying to recover a $10m “gift” made to the parents, as well as Mr Bankman’s $200,000 FTX salary and $5.5m in donations made to Stanford University.

The pair also encouraged FTX to make donations to organisations and political causes they supported, the court filings say.

Sam Bankman-Fried
Sam Bankman-Fried will stand trial on charges of fraud in October - Bebeto Matthews/AP

FTX imploded last year after a multibillion-dollar black hole was uncovered in its accounts.

Its founder, Sam Bankman-Fried, has been accused by US prosecutors of misusing customer funds to fuel a risky trading spree at a cryptocurrency hedge fund he owned, leading to huge losses.

The company’s collapse and liquidation have become emblematic of the cryptocurrency bubble, which burst towards the end of the Covid-19 pandemic.

Around 80,000 Britons are estimated to have been left out of pocket after Bahamas-based FTX went bankrupt.

He has denied wrongdoing and his trial on charges of fraud will begin in October.

Coindesk first reported the court filings. Mr Bankman was contacted for comment.

Sean Hecker, lawyer for Joe Bankman, and Michael Tremonte, counsel for Barbara Fried, said FTX’s lawsuit against their clients was a “dangerous attempt” to intimidate them “just days before their child’s trial begins”.

They said: “These claims are completely false.”