FTX Estate Seeks to Recoup $1.76B From Binance, Plus Exec 'Piggy Bank' Payouts
FTX and its affiliates, represented in the bankruptcy court by Sullivan & Cromwell and Landis, Rath & Cobb, have filed a total of 36 adversary actions since Oct. 28, 25 of which were filed on Nov. 8.
November 11, 2024 at 04:07 PM
3 minute read
Attorneys for FTX have filed dozens of actions in the Delaware Bankruptcy Court seeking to recover funds for the cryptocurrency exchange's bankruptcy estate, including $1.76 billion Binance received for selling its FTX stake.
Filings call the Binance clawback and others fraudulent transfers, stating FTX would have been insolvent when making payments leading up to its November 2022 Chapter 11 petition.
FTX and its affiliates, represented in the bankruptcy court by Sullivan & Cromwell and Landis, Rath & Cobb, have filed a total of 36 adversary actions since Oct. 28, 25 of which were filed on Nov. 8. Debtors' counsel has been filing adversary actions seeking to recover funds for the FTX estate for nearly two years, but previous actions have been filed more sporadically.
The Binance sale has the largest price tag among the recently-filed actions, but FTX is also attempting to recover hundreds of millions of dollars invested in cryptocurrency and distributed across multiple exchanges, as well as funds it claims were taken from FTX by criminal means.
The complaints seek to recover nearly $44 million allegedly routed through FTX to nonprofits and political action groups at a time the exchange was insolvent but before a bankruptcy petition was filed. One brings breach of fiduciary duty claims against former FTX executive Ryan Salame, who pleaded guilty to campaign finance fraud charges and is currently serving a 90-month sentence in federal prison. FTX has asked the court to void transfers made to Salame, who is alleged to have received $98.8 million in misappropriated funds from the FTX estate.
Criminal charges involving political contributions were also brought against FTX co-founder Sam Bankman-Fried, but were dropped last July as part of an extradition treaty between the United States and the Bahamas. Filings from Nov. 8 state Bankman-Fried, former FTX executives Gary Wang and Nishad Singh and former Alameda Research CEO Caroline Ellison, using FTX as "their personal piggy bank and treasury," siphoned billions of dollars of customer funds away from FTX "to finance their lavish lifestyles, woo business prospects and political allies, line their pockets and those of their families and friends, and make reckless investments designed to prop up and advance their stature and notoriety in the crypto community."
Several of the complaints state the amount FTX executives invested in certain ventures far outweighed the returns on those investments. Among those payouts is $25 million, plus millions more in later payments and bonuses, transferred to a group that included Bankman-Fried's childhood friends and his parents' godson for the development of a video game that never progressed beyond beta testing.
"As with so many of the FTX insiders’ pre-petition 'friends and family' investments and payments, there was never even a pretense that the debtor was receiving reasonably equivalent value for its $25 million," that complaint stated.
FTX is similarly seeking to recover a $11.5 million investment in a bank holding company, which one filing called "an amount equal to double the bank’s entire reported net worth for just a 10% interest."
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