FTX Clawback Lawsuit Faces Dismissal Plea from Sam Bankman-Fried’s Parents

Joseph Bankman and Barbara Fried said the lawsuit seeks to “capitalize on the sheer fact” they were the parents of the former FTX CEO.

The parents of former FTX CEO Sam Bankman-Fried are seeking to have FTX’s lawsuit against them dismissed, rejecting claims they knew about the problems at the crypto exchange and knowingly benefitted from misconduct at the firm.

According to a Jan. 15 court filing, lawyers representing Joseph Bankman and Barbara Fried argued that FTX’s lawsuit sought to “capitalize on the sheer fact” that they were the parents of the former FTX CEO.

The FTX lawsuit in September alleged that Bankman and Fried exploited their access and influence within the FTX empire to enrich themselves at the expense of the debtors in the FTX bankruptcy estate.

However, Bankman and Fried have denied the claims, arguing that much of the claims were based on their relationship with their son.

“That relationship is not actionable,” argued attorneys from Montgomery McCracken Walker & Rhoads.

The lawyers have rejected the claim that Bankman had a fiduciary relationship with FTX and served as a defacto director but said that even if there was a fiduciary relationship, the plaintiffs have failed to plausibly allege 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.

Similar arguments were posted for Sam Bankman-Fried’s mother, Barbara Fried — arguing there was a failure to allege an underlying breach and actual knowledge of any misconduct.

“The claims against Mr. Bankman and Ms. Fried should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6) and Federal Rule of Bankruptcy Procedure 7012(b) for failure to state a claim.”

For months, FTX has been trying to claw back millions of dollars in cash and gifts from the pair, including a $16.4 million villa in the Bahamas.

Bankman and Fried’s lawyers argued that neither a $10 million cash gift nor the Bahamas “Blue Water” property satisfied any allegation of “self-interest” as the property was used by FTX employees as a place of business, and the $10 million transfer was a gift paid out by Sam Bankman-Fried’s personal account, at the time when the company was worth and valued at “billions of dollars.”

“This negates any conclusory assertion that the gift could plausibly be attributed to “self-interest” on the part of Mr. Bankman,” they argued.

The crypto exchange filed a complaint against Bankman-Fried’s parents alleging a breach of fiduciary duty claims and fraudulent transfers.

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