FTX files Lawsuit on SBF And Allies to Recover Funds From $1 Billion In Questionable Transactions

On Thursday, July 20, bankrupt crypto exchange FTX has filed a new lawsuit against disgraced FTX co-founder Sam Bankman-Fried and his allies in an attempt to recover some millions of dollars in case as well as unwind the $1 billion in questionable transactions.

A group of people, including Bankman-Fried, FTX co-founder Gary Wang, Nishad Singh, and Caroline Ellison, who was the co-chief executive of Alameda Research LLC, a key FTX unit, are the focus of a lawsuit. They are accused of engaging in fraudulent transfers that benefited them personally while not benefiting FTX.

For example, the lawsuit claims that in May 2022, Bankman-Fried and Wang took $546 million from Alameda to purchase shares in Robinhood Markets Inc. They allegedly provided Alameda with fake loans that did not require any collateral and offered lower interest rates than the regular market rates. The only authorization for these loans to Alameda came from Ellison, according to the lawsuit.

Bankman-Fried, Wang, and Singh are also accused of using fake loans to acquire FTX stock worth $250 million at the time. The company's new CEO, John Ray, and his team are trying to recover money through various lawsuits. They want to use these funds to pay back the people the company owes money to, including customers who had their cryptocurrency stored on the exchange before it shut down in November. The bankruptcy rules allow FTX to get back payments that were made before the company filed for Chapter 11 bankruptcy protection.

In another development, the U.S. Department of Justice (DoJ) has accused SBF of leaking the private diary of former colleague Caroline Ellison to the New York Times. Yesterday, The New York Times published an article that looked into Ellison's personal writings, describing them as a crucial "star witness" in the upcoming trial of Bankman-Fried. Before FTX's collapse, Ellison was in charge of Alameda Research, a related trading firm, and had a romantic relationship with Bankman-Fried on certain occasions.

The lawyers are requesting an order to limit outside statements because this case has received significant media attention, and they believe the defendant is trying to use the media to his advantage. They argue that this could unfairly influence the potential jurors and is also harassing Ellison. Furthermore, they are worried that other witnesses may be discouraged from testifying out of fear of public embarrassment and personal attacks.

In its filing the DoJ noted: By selectively sharing certain private documents with the New York Times, the defendant is attempting to discredit a witness, cast Ellison in a poor light, and advance his defense through the press and outside the constraints of the courtroom and rules of evidence: that Ellison was a jilted lover who perpetrated these crimes alone.”