More legal woes for Sam Bankman-Fried and ex Caroline Ellison as class action suit demands damages
LOS ANGELES, CALIFORNIA: A lawsuit filed in California seeking damages for "one of the largest frauds in US history" has added to Sam Bankman-Fried and his ex-girlfriend's legal difficulties related to the multi-billion dollar collapse of FTX. A class action lawsuit that also targets fellow FTX executives Gary Wang and Nishad Singh names Bankman-Fried and Caroline Ellison, his former on-off girlfriend who shared the disgraced crypto tycoon's $40 million Bahamas apartment with him.
In addition, US accountancy firms Armanino and Prager Metis are named as defendants in the case. It is claimed that they issued reports that "found the FTX Entities to be in good financial health" and made "cheerleading" remarks "in support of Bankman-Fried and the FTX Entities," reported Daily Mail. The lawsuit was filed on Tuesday, January 3 the same day that 30-year-old Bankman-Fried appeared in court in New York and pleaded not guilty related to the collapse of FTX.
The company failed after lending billions of dollars in client funds to another of Bankman-firms, Fried's Alameda Research, which was controlled by ex-girlfriend Ellison, 29. Alameda is accused of spending cash on risky investments that did not pay off. Lawyers for FTX clients seek damages in court documents obtained by DailyMail for charges such as fraud, negligent misrepresentation, and civil conspiracy. It reads, "As alleged herein, and being currently spilled out in the parade of actions being pursued against Bankman-Fried, Ellison and Wang, the FTX Entities were operated essentially as a Ponzi scheme." The 14-count lawsuit refers to the scam as the FTX "house of cards," which has now tumbled down in one of the largest frauds in US history.
Lawyers mention a number of other legal actions against FTX, as well as critical appraisals of the company issued during its bankruptcy procedures. "A key component of the highly lucrative promotional marketing campaign included the air of legitimacy that the Auditor Defendants" purported auditing work and other supportive statements" the lawyers continue, detailing the charges against the accounting companies, as per the report. Firms Armanino and Prager are reported to have "issued certified reports that purportedly found the FTX Entities to be in good financial health." "Armanino and Prager each published what have been coined in the press as "cheerleading" statements in support of Bankman-Fried and the FTX Entities in 2021 and 2022," the case claims. "These 'cheerleading' statements negate any claim of auditor independence by either of the Auditor Defendants." As per reports, lawyers refer to "numerous red flags" reportedly "dangled in front of" the accountancy firms.