Bankrupt cryptocurrency exchange FTX is suing its founder and former head Sam Bankman-Fried and other executives in a plan to recoup over US$1bn allegedly fraudulently siphoned from the company.
Led by former Enron administrator John J. Ray III, FTX’s bankruptcy estate filed the suit before the bankruptcy court in Delaware, naming Bankman-Fried’s former executive colleagues Caroline Ellison, Zixiao ‘Gary’ Wang and Nishad Singh as co-defendants.
Bankman Fried and co’s allegations are well documented. They are accused of misappropriating as much as US$8bn worth of FTX customers’ funds through sister platform Alameda Research.
Caroline Ellison, who was romantically involved with Bankman-Fried, was head of quant trading firm Alameda Research at the time.
She has pleaded guilty to conspiracy to commit wire fraud and is expected to testify against former lover and boss Bankman-Fried when his trial commences this October.
Wang and Singh have also pleaded guilty to fraud charges for their involvement in the multi-billion-dollar alleged fraud.
Bankman-Fried leaks Ellison’s diary entries
Bankman-Fried, who remains under house arrest at his parents’ California mansion on a US$250mln bail, copped more salacious accusations this week too.
Following a New York Times article that published extracts from Ellison’s private diary entries, the Department of Justice (DoJ) has blamed Bankman-Fried for the leak.
“The defendant’s actions – sharing personal writings of Caroline Ellison’s with a New York Times reporter – implicate the core concern of Rule 23.1 that disseminating material related to the ‘testimony or credibility of prospective witnesses’ presumptively involves a substantial likelihood or prejudice to a fair trial and the due administration of justice," US attorneys stated.
The diary leaks paint a somewhat sympathetic picture of Ellison, in which she discussed being ill-equipped to run Alameda Research and having feelings of joy over Alameda’s and FTX’s pending collapse.
“It is apparent that documents were shared by the defendant with the Article’s reporters. When the Government learned this week that this Article was forthcoming, defense counsel confirmed that the defendant had met with one of the Article’s authors in person and had shared,” said the DoJ.
The DoJ is seeking an order that limits the publication of extrajudicial statements from Bankman Fried and others that are “likely to interfere with a fair trial by an impartial jury”.