“Fraudulent transfers worth over a billion dollars were made for the benefit of Defendants during the period February 2020 to November 2022.”
Targeted in the suit are key figures in the FTX conglomerate: Bankman-Fried, former chief technology officer Gary Wang, ex-director of engineering Nishad Singh, and Caroline Ellison, former CEO of Alameda Research. The defendants allegedly created fraudulent transfers for personal gain at the expense of FTXs’ cusomers:
“There were no existing limitations on Alameda’s ability to spend FTX exchange customers’ cash for its own purposes.”
Ellison, Wang, and Singh have confessed to fraud and are assisting federal prosecutors, Bankman-Fried denies all charges and awaits trial in October.
Allegations in the suit include inappropriate bonuses and unjust enrichment. Ellison allegedly transferred $22.5 million to Alameda’s payroll, then to a third entity owned by FTX, Salameda Limited, “before finally being sent to Ellison’s own personal account on the FTX exchange.”
Meanwhile, Bankman-Fried faces accusations of backdating a “Payment Agent Agreement” in a suspected attempt to bolster FTX’s initial public offering prospects, but it was a sham and the loan was issued to Alameda Research.
However, “the same FTX attorney [one year later] prepared another version of the sham agreement that did not reflect any loan to Alameda, which stated that Alameda provided mere ‘payment services’ pursuant to which it would ‘complete payments . . . as directed by FTX from time to time.’”
Alleged to misguide an external auditor and to prepare the company for a possible initial public offering, the agreement was part of a scheme where Alameda would not transfer any customer deposits to FTX, contrary to what was promised.
Ellison reportedly admitted the unique privileges that allowed Alameda unlimited access to credit without the necessity for collateral or interest payments. She also accepted that many of these investments were purposely made under Alameda’s name to hide the source and use of the funds.
“Ellison also ‘understood that FTX would need to use customer funds’ to make many of its investments […] and admitted that many investments ‘were done in the name of Alameda instead of FTX in order to conceal the source and nature of those funds.’”
Bankman-Fried is said to have supplied prospective investors with an Alameda balance sheet that inaccurately portrayed a liability of $8 billion, further obscuring the true financial situation.
It gets weirder.
The lawsuit sheds light on “frequently misguided and sometimes dystopian” plans within the FTX Foundation. A memo exchange between Gabriel Bankman-Fried — SBF’s brother — and another executive hinted at a scheme to acquire the island nation of Nauru, aimed at creating a bunker for effective altruism enthusiasts in case of a major population disaster.
“To develop a ‘sensible regulation around human genetic enhancement, and build a lab there.’ The memo further noted that ‘probably there are other things its useful to do with a sovereign country, too.’”