Sam Bankman-Fried’s parents are seeking the dismissal of the lawsuit filed against them by FTX. The lawsuit accuses Joseph Bankman and Barbara Fried of being aware of issues within the crypto exchange and profiting from misconduct. In a court filing on January 15, the lawyers representing Bankman and Fried argued that FTX’s legal action aimed to exploit their familial connection to the former CEO.
FTX’s lawsuit claims that the parents leveraged their influence within the FTX organisation to enrich themselves, negatively impacting the debtors in the FTX bankruptcy estate. However, Bankman and Fried have refuted these allegations, contending that much of the case is centred on their parent-child relationship, which they argue is not legally actionable.
🔸 FTX sues founder Bankman-Fried’s parents
Bankrupt crypto exchange FTX on Monday sued the parents of founder Sam Bankman-Fried, saying that Stanford professors Joseph Bankman and Barbara Fried used the company to enrich themselves at the expense of FTX’s customers.
FTX, now… pic.twitter.com/iZqbr4TUWq
— Cryptocurrency Hunter (@MoneyHunter369) September 20, 2023
Bankman and Fried’s attorneys from Montgomery McCracken Walker & Rhoads rejected the assertion that Bankman held a fiduciary relationship with FTX or acted as a de facto director. Even if such a relationship existed, they argued that the plaintiffs failed to convincingly allege any breach. The lawyers emphasised that mere conclusory allegations are insufficient for a plausible claim, insisting that the complaint must present enough factual evidence to reasonably infer the defendant’s liability for the alleged misconduct.
“Mere conclusory allegations are insufficient to state a plausible claim for relief. The complaint must contain sufficient facts allowing the court to draw the reasonable inference that the defendant is liable for the misconduct alleged,” they argued.
Similar arguments were made for Barbara Fried, with her lawyers claiming a lack of evidence of an underlying breach and actual knowledge of any misconduct. The legal team concluded that the claims against Bankman and Fried should be dismissed based on Federal Rule of Civil Procedure 12(b)(6) and Federal Rule of Bankruptcy Procedure 7012(b) for failure to state a claim.
FTX has been attempting to recover millions of dollars in cash and gifts, including a $16.4 million villa in the Bahamas, from Bankman and Fried for several months. The defence team countered these efforts, asserting that a $10 million cash gift and the Bahamas property did not demonstrate self-interest. They argued that the property served as a business location for FTX employees, and the $10 million transfer was a gift from Sam Bankman-Fried’s personal account when the company was valued at billions of dollars, refuting any notion of self-interest on his part.
“This negates any conclusory assertion that the gift could plausibly be attributed to “self-interest” on the part of Mr. Bankman,” they argued.
The crypto exchange filed a complaint in September last year, accusing Bankman-Fried’s parents of breaching fiduciary duties and engaging in fraudulent transfers.