As the FTX bankruptcy moves into its next phases, FTX and its affiliated companies, under new management, have filed an action in bankruptcy court against Sam Bankman Fried’s (“SBF”) parents, both tenured Stanford Law professors. In Alameda v. Allan Joseph Bankman and Barbara Fried, Case No. 23-50584-JTD, part of In Re: FTX Trading Ltd, Case No. 22-11068 (Del. Bank. 2022), the bankrupt entities have sued the law professors in a multi-count complaint alleging numerous breaches of fiduciary duty, unjust enrichment, aiding and abetting, and fraudulent transfers. The filing was made on September 18, 2023.
Bankman’s role at FTX is alleged to have been far wider than previously reported in the media. Excerpts from the complaint include the following:
Bankman interacted with employees and affiliates and operated across the FTX Group and related entities in a manner reflecting his high-level executive status. Bankman was deeply enmeshed in and wielded significant influence over the FTX Group since the founding of the FTX Group entities. Bankman was virtually the only grown-up in the room, guiding the FTX Group and other executives, many of whom were recent college graduates in their mid-20s and had never before run a company, let alone managed billions of dollars. FTX US General Counsel described Bankman as a “strategic advisor to and general overseer of the FTX businesses.”
In addition, Bankman authorized expenses to be paid by the FTX Group, such as $1,200 per night hotels for himself and plane tickets and tickets to the Formula 1 Grand Prix in France (what he called “a free trip to France”) for a student at Stanford Law School who later became outside counsel to the FTX Group. Bankman’s access and authority within FTX Trading, Alameda, Alameda Ltd., and FTX US gave him de facto officer, director, and/or manager status at each.
On January 12, 2022, despite Bankman’s employment agreement with FTX US detailing a $200,000 annual salary, Bankman complained to FTX US Head of Administration that he was receiving gross pay of only $16,667 per month from FTX US, when he was “supposed to be getting $1M/yr, starting in December. So that would be a bit more than $80,000 a month, gross…” Bankman promptly brought his discontent to Bankman-Fried’s attention, emailing his son, “Gee, Sam I don’t know what to say here. This is the first [I] have heard of the 200K a year salary! Putting Barbara on this.” In other words, Bankman lobbied his son to massively increase his own salary.
Bankman’s influence paid off, not only for him, but for Fried too. Within two weeks, Bankman-Fried gifted Bankman and Fried together $10 million in funds originating from Alameda Ltd. Within three months, Bankman-Fried caused the couple to be deeded a $16.4 million property in The Bahamas paid for with funds ultimately provided by FTX Trading. Bankman and Fried enjoyed the benefits of more than $90,000 in expenses, paid for by FTX Trading, for their Bahamas residence. Bankman also received an option to purchase 4.5 million shares of WRS and 1,008,000 shares of FTX Trading in November 2021.
Bankman received other benefits as well. For example, at his request, Bankman received a cameo appearance alongside Larry David in a now-infamous 2022 FTX Super Bowl commercial. Bankman pushed for his role in the commercial, stating bluntly, “OK, I’m not a starfucker and don’t really care about meeting, say, Tom Brady. But Larry David….”
From November 2021 to May 2022, Bankman led the charge in directing FTX Group donations of more than $5.5 million to his employer, Stanford University—donations that did not benefit the FTX Group, and instead amounted to naked self-dealing by Bankman, who sought to curry favor with and enrich his employer at the FTX Group’s expense. In advancing Stanford University as a recipient of FTX Group charitable donations, Bankman also conceived of various creative means by which to remit payments to Stanford University through different FTX Group entities.