NEW YORK — Following a lawsuit against FTX Trading founder Sam Bankman-Fried’s parents alleging that Stanford University received millions of dollars in donations from the now-collapsed cryptocurrency exchange, the school said it will return the funds of all gifts collected from FTX and related companies.
Lawyers for FTX on Monday accused Allan Joseph Bankman and Barbara Fried of exploiting their influence over their son to siphon millions from the company, while spending lavishly on a luxury home as well as funneling contributions to “pet causes” — and Stanford University.
The suit claims that Bankman, who is a Stanford law professor and expert in tax law, directed more than $5.5 million in charitable contributions from FTX to the university — in what the complaint describes as “naked self-dealing” in an attempt to “curry favor with and enrich his employer at the FTX Group’s expense.”
In a statement sent to The Associated Press on Wednesday, a university spokesperson said that Stanford “received gifts from the FTX Foundation and FTX-related companies largely for pandemic-related prevention and research.”
Stanford is in discussions with attorneys for FTX debtors to recover the gifts, the spokesperson added, and “will be returning the funds in their entirety.” The university did not specify the monetary value of the gifts it received.
Like Bankman, Fried worked at Stanford for many years. She’s a retired law professor.
FTX entered bankruptcy in November when the company ran out of money after the equivalent of a bank run. Bankman-Fried has pleaded not guilty to charges that he cheated investors and looted customer deposits to make lavish real estate purchases, campaign contributions to politicians, and risky trades at his cryptocurrency hedge fund trading firm Alameda Research.
Monday’s complaint, filed in the company’s bankruptcy case in Delaware, accuses Bankman-Fried’s parents of participating in the wrongdoing that led to FTX’s collapse — writing that, in addition to the couple draining millions from FTX for personal interests, Bankman “played a key role in perpetuating this culture of misrepresentations and gross mismanagement and helped cover up allegations that would have exposed the fraud committed by the FTX insiders.”
“Despite presenting itself to investors and the public as a sophisticated group of cryptocurrency exchanges and businesses, the FTX Group was a self-described ‘family business,’” the lawsuit states.
“Bankman played a key role in perpetuating this culture of misrepresentations and gross mismanagement and helped cover up allegations that would have exposed the fraud committed by the FTX insiders,” the complaint adds. “And together, Bankman and Fried siphoned millions of dollars out of the FTX Group for their own personal benefit and their chosen pet causes. This action seeks to hold them accountable for their misconduct and recover assets for the debtors’ creditors.”
Attorneys for Bankman and Fried issued a statement calling the claims “completely false” — adding that the lawsuit is a “dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins.”
Bankman-Fried’s trial on federal fraud charges is scheduled to begin October 3 in New York. Several other former FTX executives have pleaded guilty to fraud and conspiracy charges and are cooperating with investigators.
Lawyers for Bankman-Fried argued to a federal appeals court panel Tuesday that his free-speech rights and ability to prepare for trial have been impaired by a judge’s decision to revoke his $250 million bail and hold him in pretrial detention. The judge revoked Bankman-Fried’s bail last month after finding probable cause that he had tampered with witnesses.