Sam Bankman-Fried's parents seek to dismiss FTX lawsuit against them

FTX Founder Sam Bankman-Fried’s parents are attempting to have the lawsuit filed by the exchange against them dismissed, as they argued that they were not involved in allegedly fraudulent transfers or breaches of fiduciary duties.

In a filing dated Monday, the lawyers for Joseph Bankman and Barbara Fried said that plaintiffs — including debtors of FTX and Alameda Research — sought to “capitalize on the sheer fact that Defendants’ son was a founder and executive of the Debtor entities.”

“That relationship is not actionable,” said the attorneys for Bankman and Fried. “While Plaintiffs allege Defendants interacted with the Debtor entities in limited capacities, neither Defendant ever held an executive role of any sort.”

The Monday document to support their motion to dismiss the lawsuit came after FTX filed a complaint in September 2023 against Bankman-Fried’s parents to recover damages caused by fraudulent transfers, breaches of fiduciary duties and other alleged misconduct.

“As Bankman-Fried’s parents, Bankman and Fried exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars, and knowingly at the expense of the debtors in these Chapter 11 Cases and their creditors,” the plaintiffs said in the September filing.

 

Family business?

The plaintiffs argued that Bankman had described Alameda as a “family business” and purchased a $16.4 million luxury property in The Bahamas, referred to as “Blue Water” or “Old Fort Bay,” with the funds sourced from cash provided by the debtors.

Bankman and Fried denied the claims, saying that Bankman’s familial relationship and communications to Bankman-Fried “do not make Mr. Bankman, by association, a de facto director of Alameda or FTX US.” 

The attorneys said the lawsuit does not allege that the parents used Blue Water as their primary or exclusive residence. “Debtors are well aware that at the times relevant to the Blue Water transaction, many FTX Group operations and business properties were located in the Bahamas, and FTX employees lived and worked there.”

The lawsuit also alleged that Bankman and Fried pushed for tens of millions of dollars in political and charitable contributions, including to Stanford University, “which were seemingly designed to boost Bankman’s and Fried’s professional and social status at the expense of the FTX Group.”

The parents’ lawyers argued that such an allegation is “of no legal significance,” as it does not allege that Bankman or Fried received funds donated to Stanford or received any “undefined benefit” as a result of that donation.