In an ongoing legal saga, Joseph Bankman and Barbara Fried, the parents of former FTX CEO Sam Bankman-Fried, are fighting back against a lawsuit brought by cryptocurrency exchange FTX. The suit alleges that the couple knowingly benefitted from misconduct within the firm and exploited their access and influence.
However, Bankman and Fried have sought to dismiss the lawsuit, arguing that it merely capitalizes on their familial ties to Sam Bankman-Fried.
Sam Bankman-Fried’s parents’ connection questioned
Lawyers representing Joseph Bankman and Barbara Fried have contended that FTX’s lawsuit primarily targets them due to their relationship with their son.
The lawsuit, filed in September, claimed that Bankman and Fried had enriched themselves at the expense of FTX’s debtors in the bankruptcy estate.
The parents vehemently deny these allegations, asserting that their connection with their son should not be the basis for legal action.
“That relationship is not actionable,” argued attorneys from Montgomery McCracken Walker & Rhoads, representing Bankman and Fried.
Denial of fiduciary relationship
The legal team for Joseph Bankman and Barbara Fried has not only denied the allegations of misconduct but also the existence of a fiduciary relationship between Bankman and FTX.
They argue that even if such a relationship were to be acknowledged, the plaintiffs have failed to provide sufficient evidence of a breach.
“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.
Parallel arguments for Barbara Fried
Similar arguments were presented on behalf of Barbara Fried, Sam Bankman-Fried’s mother. Her legal defense team has contended that there is a lack of evidence regarding an underlying breach and actual knowledge of any misconduct.
They assert that the claims against both Joseph Bankman and Barbara Fried should be dismissed under Federal Rule of Civil Procedure 12(b)(6) and Federal Rule of Bankruptcy Procedure 7012(b) for failing to state a claim.
FTX’s clawback efforts
FTX has been actively attempting to recover millions of dollars in cash and gifts from Joseph Bankman and Barbara Fried, including a $16.4 million villa in the Bahamas. However, the parents’ legal representatives have argued that neither a $10 million cash gift nor the Bahamas “Blue Water” property should be viewed as evidence of self-interest.
They maintain that the property was used as a place of business for FTX employees, and the $10 million transfer was a gift from Sam Bankman-Fried’s account when the company was valued at “billions of dollars.”
According to their argument, this negates any assertion that the gift could be plausibly attributed to “self-interest” by Joseph Bankman.
FTX’s initial complaint against Joseph Bankman and Barbara Fried included allegations of a breach of fiduciary duty and fraudulent transfers. The legal battle continues to unfold as both sides present their arguments, with the parents vigorously contesting the claims brought against them.
As the legal proceedings progress, the outcome of this case will have implications not only for the individuals involved but also for the broader cryptocurrency and financial industries.
The lawsuit underscores the importance of transparency and accountability within the crypto space. It serves as a reminder of the legal complexities that can arise in the rapidly evolving world of digital assets.