Joseph Bankman and Barbara Fried were always close to their son. A certain amount of interest in the well-being of their son and that of his business dealings is to be expected.
However, the FTX estate, now led by bankruptcy specialist CEO John J Ray III, argues that SBF’s parents – particularly his father – had a much bigger presence in the FTX Groups’ dealings than it appears on paper.
If the allegations can be proven true, benefits derived from FTX and its former CEO could be subjected to clawbacks, in particular, a $10 million cash gift to Joseph Bankman and a luxury property in the Bahamas.
Advisory Capacity, Or Something More?
Officially, Joseph Bankman, who is a tenured Stanford law professor, never received a salary or any legally binding payments from any FTX entity. Instead, he only served in an advisory capacity to certain FTX entities on a pro bono basis.
The lack of any documents indicating Joseph Bankman was paid for his work is crucial to his defense against the clawbacks, as evidence of payment for services could serve as proof of a breach of fiduciary duty.
“First, as to the breach of fiduciary duty claims, (made against Mr. Bankman only), Plaintiffs have not adequately pleaded a fiduciary relationship between Mr. Bankman and Debtors, nor can they, as Mr. Bankman never served as a director, officer, or manager, de facto or otherwise. Even if Plaintiffs had plausibly alleged a fiduciary duty, they have not adequately pleaded a breach thereof.”
Although former FTX staffers have hinted that Bankman had a far more hands-on approach than officially stated, much of this is hearsay by legal standards. The couple also facilitated donations to Stanford University, which the learning institution plans to give back to the FTX estate of its own accord.
Given the allegedly sparse amount of evidence indicating a breach of fiduciary duty to FTX investors, SBF’s parents have filed for the dismissal of the exchange’s case against them.
Family Business, or Family vs Business?
According to documents filed on behalf of Barbara Fried and Joseph Bankman, the only reason for the cash gifts, luxury real estate, and other perks such as plane tickets and 5-star hotel stays they received is their personal relationship with SBF, which is a non-actionable relationship in court.
Furthermore, the allegations against SBF’s parents lack evidence altogether, their lawyers argue.
“Plaintiffs have failed to plausibly allege any underlying breaches of fiduciary duties, that each Defendant had actual knowledge of the alleged breach, and the necessary scienter.”
Given the circumstances, the defendants have requested that the case against them be dismissed, barring the Blue Water property valued at about $16 million and all other gifts from being returned to the FTX estate.
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