The bankrupt crypto exchange FTX has sued former CEO Sam Bankman-Fried and several other key ex-executives, including Caroline Ellison, Gary Wang and Nishad Singh, to recover more than $1 billion in allegedly misappropriated customer funds.
FTX filed for Chapter 11 bankruptcy protection on November 11 after a liquidity crunch triggered by a rush of customer withdrawals. The exchange subsequently initiated legal action against multiple parties to recover assets.
The lawsuit was filed on July 20 in a United States Bankruptcy Court in Delaware. In it, FTX claims the defendants breached their fiduciary duties and “abused their control” over FTX and related companies.
FTX alleges that the former executives misappropriated customer funds “on a continuous basis” over the course of two years. The funds were allegedly used to “finance luxury condominiums, political and ‘charitable’ contributions, speculative investments and other pet projects.”
The lawsuit describes this as “one of the largest financial frauds in history.” It specifically accuses Bankman-Fried of transferring at least $4 billion of customer funds to Alameda Research, the crypto trading firm he co-founded and which Ellison led.
The defendants named in the lawsuit include:
- Sam Bankman-Fried: Former CEO and co-founder of FTX and Alameda Research.
- Caroline Ellison: Former CEO of Alameda Research.
- Gary Wang: Co-founder and former chief technical officer of FTX.
- Nishad Singh: Former engineering director at FTX.
All four were key executives at FTX and/or Alameda Research. The lawsuit alleges they “knew or should have known” their actions constituted breaches of fiduciary duty and negligence.
FTX is seeking more than $1 billion in compensation from the former executives. This includes the return of all allegedly misappropriated funds as well as damages for harm caused to FTX’s business.
None of the named defendants have publicly responded to the allegations at this stage. Bankman-Fried has yet to comment on the lawsuit, though he has previously apologized for FTX’s collapse and accepted responsibility.
The lawsuit marks another stage in the complex unwinding and investigation into what went wrong at FTX. The U.S. Department of Justice and Securities and Exchange Commission are also reportedly probing the company.
In summary, the FTX lawsuit alleges that former CEO Sam Bankman-Fried and other key executives misused over $1 billion in customer funds for improper purposes. If the claims are proven, it would represent one of the largest instances of fraud and mismanagement in cryptocurrency history. The identities and roles of the named defendants suggest that culpability may run to the very highest levels of FTX and Alameda Research.