FTX Founder Bankman-Fried Sparks Outrage Over Request To Tap $10M Insurance Funds

Zinger Key Points
  • Bankman-Fried wants insurance money for legal bills.
  • FTX debtors and creditors object.

It's "unfair" and "inequitable" for former FTX CEO Sam Bankman-Fried to use the cryptocurrency company's $10 million insurance policy to pay his legal bills, lawyers say.

Bankman-Fried, who is under investigation, has requested a court order that would allow him to access the company's director and officer insurance plan to reimburse his costly legal expenses, The Block reported.

However, the FTX debtors, which includes the entity West Realm Shires, and the Official Committee of Unsecured Creditors, a group of FTX or FTX-affiliate company customers, have objections to Bankman-Fried's request.

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“Directors and officers insurance policies exist to protect the company and its directors and officers in situations where they make honest decisions in the ordinary course of the business," the creditors' committee stated in a court filing. "This is not that case.”

The committee also noted that every dollar that goes towards Bankman-Fried's legal costs reduces the amount of money available to repay creditors. The disgraced entrepreneur is also funding his criminal legal defense with a gift made by Alameda Research to his father.

"If the court is inclined to lift the automatic stay...the court should enter relief broad enough to allow the insurers to pay any or all insureds, pursuant to the terms and conditions of the policies, and not just Mr. Bankman-Fried," FTX's lawyers stated in their filing.

The FTX debtors are not legally allowed to oppose Bankman-Fried's request to lift the stay on the insurance policy.

Bankman-Fried, who has pleaded not guilty in a U.S. District Court for the Southern District of New York, is facing charges of mishandling FTX customer funds, illegal political donations, and propping up his bankrupt crypto trading firm, Alameda Research, among other crimes. He is awaiting an October trial.

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Posted In: CryptocurrencyNewsLegalStartupsMarketsAlameda Researchcriminal chargescrypto tradingFTXInsurance policyLegal proceedingsSam Bankman-FriedU.S. District Court
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