KEY POINTS
- FTX sued Bankman-Fried’s parents for unlawful enrichment through ‘access and influence’ in September last year
- Bankman and Fried now ask the court to dismiss the FTX lawsuit
- The controversy surrounding Bankman-Fried is also a family drama that involves not only his brother but also his parents
Joseph Bankman and Barbara Fried, Stanford University scholars and parents of the controversial crypto mogul Sam Bankman-Fried, have formally requested the dismissal of a legal action by bankrupt cryptocurrency firm FTX, which aimed to recoup finances it alleged were illicitly diverted.
The controversy surrounding Bankman-Fried is also a family drama that involves not only his brother but also his parents.
From renowned Standford University scholars, the lives of Bankman and Fried took a turn when their son’s crypto derivatives exchange platform FTX burgeoned into a multi-billion dollar company where Joseph was “a de facto officer, director, and/or manager,” according to the lawsuit filed by FTX in September.
Barbara is another story and though unlike Joseph, she did not have a role in her son’s empire, FTX’s lawyers claimed that she was “the single most influential advisor regarding Bankman-Fried’s and the FTX Group’s political contributions.”
Joseph Bankman allegedly received a $200,000 FTX salary but after he expressed disappointment with the amount he received, his son reportedly wired a $10 million cash gift to his parents, which according to FTX lawyers, came from Alameda Research, the crypto hedge fund that Bankman-Fried also co-founded.
However, FTX did not specify the exact sum allegedly misappropriated by Bankman and Fried.
However, the document detailed certain expenditures: Bankman’s annual remuneration of $200,000 as a senior adviser to the FTX foundation, over $18 million allocated for Bahamian real estate, and $5.5 million in contributions made by the FTX Group to Stanford University.
The University has announced its intention to return these funds.
In a court document filed on Monday, lawyers for Bankman and Fried argued that Bankman did not maintain a fiduciary relationship with FTX, emphasizing his non-involvement as a director, officer, or manager within the company.
“While Plaintiffs allege Defendants interacted with the Debtor entities in limited capacities, neither Defendant ever held an executive role of any sort,” the document read.
Furthermore, the assertion is made that even if a fiduciary relationship with FTX were to be established, it would remain challenging to credibly allege a breach of such a relationship.
Moreover, Barbara and Fried’s lawyers contended that FTX’s claim that the parents “knew or should have known” is insufficient.
Instead, they said FTX is obligated to present concrete facts demonstrating “actual knowledge” on the part of the parents, specifically that they were aware certain actions would culminate in a breach of fiduciary duty.
“Further, Plaintiffs have failed to allege the necessary scienter on the part of either Mr. Bankman or Ms. Fried. It is not enough for a plaintiff to plead that a defendant ‘knew or should have known”‘ of the actions and consequences constituting an alleged breach of fiduciary duty,” the filing read.
