FTX continues its battle to recover misappropriated funds.
FTX, a renowned crypto exchange, has initiated legal proceedings against its former CEO, Sam Bankman-Fried, and several other former executives.
At the core of this lawsuit is the alleged misappropriation of over $1 billion in funds, propelling the already financially-troubled crypto exchange toward bankruptcy.
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According to the lawsuit submitted to a United States Bankruptcy Court on July 20th, FTX has leveled allegations against several former key players of the company, including Caroline Ellison, ex-CEO of Alameda Research, Zixiao “Gary” Wang, co-founder of FTX, and Nishad Singh, who served as the engineering director at FTX and former CEO Samuel Bankman-Fried.
The essence of the dispute revolves around FTX's allegations of a breach of fiduciary duties committed by the named defendants. FTX contends that these executives improperly utilized customer funds for personal gains, such as luxury accommodations, political donations, "charitable" contributions, and high-risk investments.
This, according to FTX's claim, amounts to "one of the largest financial frauds in history."
The claim further alleges that the defendants orchestrated an unhealthy corporate atmosphere where a few employees exerted disproportionate control over vital business decisions. This included the authority to handle transfers of both fiat and cryptocurrency assets and the hiring and firing of staff.
Among other charges, FTX accuses the former executives of misappropriating over $725 million worth of company equity for their own benefit without providing any equivalent value to FTX or its related entities.
In addition, the lawsuit posits that Bankman-Fried and Wang unlawfully diverted another $546 million to acquire shares in the trading platform Robinhood.
The charges do not stop here. The lawsuit also alleges that Ellison appropriated $28.8 million as personal bonuses and invested $10 million in an artificial intelligence firm. Meanwhile, Bankman-Fried is accused of transferring $10 million as a "gift" from his FTX US account to his father's account on the same platform.
FTX claims that a significant part of this "gift" was transferred to personal bank accounts to bankroll Bankman-Fried's legal expenses.
FTX stresses that these supposed fraudulent transfers took place while the crypto exchange was in a state of insolvency, a fact the defendants were well aware of, according to the lawsuit.
