The Tribune

• Davis away in Egypt fighting climate change

• ‘Meeting never scheduled’: Ray claim denied

• Parents ‘unjustly enriched’ over $19m home

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Prime Minister’s Office last night refuted claims that he was due to meet Sam Bankman-Fried’s father on the day FTX imploded because he was away battling on The Bahamas’ behalf against climate change.

Latrae Rahming, communications director for Philip Davis KC, told Tribune Business it would have been impossible for the Prime Minister to have met with Allan Joseph Bankman on November 10, 2022, because he was then in Egypt at the COP 27 summit.

He also denied that any meeting between Mr Davis and Allan Bankman has ever been scheduled, while asserting that the Prime Minister has never met either of Mr Bankman-Fried’s parents, in response to the latest allegations levied by FTX’s US chief.

John Ray, who heads the 134 FTX entities presently in Chapter 11 bankruptcy protection in Delaware, levied claims about the purported meeting in a lawsuit unveiled late Monday night where he accused Mr Bankman-Fried’s parents of “unjust enrichment” at the expense of the collapsed crypto exchange’s investors and creditors. Specifically, he is alleging that the duo used almost $19m in FTX client money to acquire their Old Fort Bay home and cover $90,000 in maintenance.

Referring to Mr Bankman-Fried’s father, the FTX US chief alleged: “Bankman remained intimately involved in the FTX Group until the end. On November 7, 2022, Bankman flew to The Bahamas and joined the scramble to find sources of capital to save the FTX group.

“As has been well-publicised, Bankman-Fried pursued a sale to Binance in a last-ditch effort to salvage FTX Trading, and Bankman was included in the small group that received the Binance Letter of Intent and a calendar invitation for a meeting with Binance scheduled for November 9, 2022.” Binance was the rival crypto exchange that FTX sought unsuccessfully to sell its business to in the final days before its collapse.

Then, without providing any supporting evidence, Mr Ray and FTX Trading asserted: “On November 10, 2022, the day before the Chapter 11 filing, Bankman was scheduled to meet with The Bahamas’ Prime Minister.” This was emphatically rejected by Mr Rahming last night, who said it would have been impossible for Mr Davis to see Mr Bankman on that day even if a meeting was set up.

“The Prime Minister was at COP [and] not in the country,” Mr Rahming pointed out. “The Prime Minister has never met the parents, was never scheduled to meet the parents and was at COP 27 on the date in question.” Tribune Business checks confirmed the validity of Mr Rahming’s statement, as the COP 27 climate change summit was held from November 6-18, 2022, thus covering the period when FTX collapsed.

This newspaper’s reports from November 10, 2022, also confirm that Mr Davis was in Sharm El-Sheikh, Egypt, that day as he commented from afar on the flooding caused in Abaco and Grand Bahama by the passage of Hurricane Nicole.

The date cited by Mr Ray is especially significant. Not only did FTX implode on November 10, 2022, but it was also the day when the Securities Commission petitioned in the Bahamian Supreme Court to place the crypto exchange’s local subsidiary, FTX Digital Markets, into provisional liquidation.

And it was also the date when Mr Bankman-Fried opened FTX for a 25-hour ‘window’, in violation of both Supreme Court and Chapter 11 orders that froze or shut down the crypto exchange, so that 1,500 alleged “Bahamian” investors could withdraw a collective $100m in assets - transactions that are likely to be treated as “voidable preferences” and subject to being clawed back by both the Bahamian provisional liquidators and Mr Ray.

Meanwhile, Mr Ray is alleging that Mr Bankman-Fried’s parents - both Stanford University Law School professors - “exploited their access and influence within the FTX enterprise to enrich themselves, directly and indirectly, by millions of dollars” at the expense of the crypto exchange’s creditors and investors. Together, it was claimed they “siphoned millions of dollars out of the FTX group for their own personal benefit and their chosen pet causes”.

The FTX founder’s father was said to have “recommended the acquisition of property in The Bahamas” using FTX monies, and Mr Ray said of both parents: “Despite knowing or blatantly ignoring that the FTX group was insolvent or on the brink of insolvency, Bankman and Fried discussed with Bankman-Fried the transfer to them of a $10m cash gift and a $16.4m luxury property in The Bahamas.”

Besides paying to acquire that Old Fort Bay property, the FTX US chief also alleged that investor monies were used to pay the $15,000 Bahamian permanent residency fees for both Mr Bankman-Fried’s parents shortly after his father took “a leave absence” from Stanford Law School in December 2021 to become employed as a senior adviser to FTX’s foundation.

Asserting that Allan Bankman “lobbied his son to massively increase his own salary”, Mr Ray alleged: “Bankman’s influence paid off, not only for him, but for Fried, too. Within two weeks, Bankman-Fried gifted Bankman and Fried together $10m in funds originating from Alameda Ltd.

“Within three months, Bankman-Fried caused the couple to be deeded a $16.4m property in The Bahamas paid for with funds ultimately provided by FTX Trading. Bankman and Fried enjoyed the benefits of more than $90,000 in expenses, paid for by FTX Trading, for their Bahamas residence.” The property in question was called ‘Blue Water’.

“On or about February 11, 2022, Bankman and Fried signed an agreement to purchase a $16.4m, 30,000 square-foot luxury property (for the two of them) with unobstructed ocean views in the Old Fort Bay community in The Bahamas,” Mr Ray asserted.

“The total cash payment for Blue Water amounted to $18.914m, inclusive of all costs, taxes and fees. Neither Bankman nor Fried contributed any money of their own towards the purchase of Blue Water. Rather, all of the funds were sourced from cash provided by the debtors.

“The transaction worked as follows. On February 14 and April 14, 2022, FTX Bahamian affiliate, FTX Digital Markets, a non-debtor entity wholly funded by FTX Trading, executed two wire transfers totaling $18.914m. These funds were debtor funds that were sourced from an FTX Trading bank account with commingled customer funds.,” Mr Ray claimed.

“FTX Digital Markets had only two sources of cash: Deposits from FTX Trading and deposits from customers of FTX Trading. FTX Trading had deposited $362m into the FTX Digital Markets account within almost eight months before the final closing on Blue Water, $150m of which was deposited on March 17, 2022, less than one month before FTX Digital Markets initiated its second wire transfer of more than $14.8m towards Blue Water.”

Internal documents, Mr Ray alleged, described the Old Fort Bay property as having been bought for FTX employees to disguise that it was for Mr Bankman-Fried’s parents. “Indeed, in September 2021, approximately five months before Bankman and Fried closed on Blue Water, Bankman and Fried applied for permanent residency in The Bahamas, which was granted in October 2022,” he added.

“A $15,000 fee for Bahamian permanent residency for each of them was expensed to FTX Digital Markets and ultimately paid for by FTX Trading. Bankman and/or Fried also arranged for cleaning and maintenance services at Blue Water. Bankman even asked FTX Digital Markets employees if the company that provided landscaping services to Blue Water could ‘bill FTX directly’.

“Less than one month after closing on Blue Water, Fried instructed FTX Digital Markets employees to place online orders, including for a sofa, at least eight vases and five rugs, one of which was a Persian hand-knotted rug costing more than $2,500, to furnish their Bahamian residence. The furnishings were purchased with either an FTX Digital Markets corporate credit card or the personal credit card of an FTX Digital Markets employee, who was reimbursed using funds that belonged to FTX Trading.”

Prior to FTX’s implosion, Mr Ray alleged that some $90,000 worth of expenses incurred by Mr Bankman-Fried’s parents at Blue Water were paid by the crypto exchange and, by extension, its clients and investors. These costs included maintenance, cleaning services, utilities, furnishings, property assessments and residency fees.

“The debtors have identified no record of either Bankman or Fried reimbursing the FTX Group for the purchase of Blue Water or any maintenance, services, furnishings or fees associated with the property and paid for by the FTX Group,” the FTX US chief alleged. “Neither Bankman nor Fried provided, or agreed to provide, plaintiffs [with] consideration reasonably equivalent to the fair market rental value of the property, services, or furnishings or fees.

“As a direct result of Bankman’s and Fried’s receipt and use of the Blue Water property and enjoyment of related benefits, including services and furnishings, Bankman and Fried were unjustly enriched at FTX Trading’s expense in an amount to be determined at trial based on the fair market value of the benefits Bankman and Fried received from residing at the property.”

Mr Ray also contradicted assertions by the Bahamian provisional liquidators for FTX Digital Markets, Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo, Kevin Cambridge and Peter Greaves, that Mr Bankman-Fried’s parents had “voluntarily” handed Blue Water over.

“A recent title search, however, shows that the title to the property remains in Bankman’s and Fried’s names, and all available information indicates that Bankman and Fried still retain title to the property,” Mr Ray alleged. He is also claiming actual and constructive fraudulent transfer against the couple.

A statement from Bankman and Fried’s attorneys yesterday denied all allegations against the couple, saying they are “completely false”.

“This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins. These claims are completely false. Mr Ray and his massive team of lawyers, who are collectively running up countless millions of dollars in fees while returning relatively little to FTX clients, know better,” said Sean Hecker, counsel to Bankman, and Michael Tremonte, counsel to Fried.