EXCLUSIVE: Sam Bankman-Fried and his ex-girlfriend face another legal battle as a class action lawsuit in California seeks damages for “one of the largest fraud cases in US history” – and is pursuing FTX’s US accountants
- Bankman-Fried and Caroline Ellison are named in a class action lawsuit also against fellow FTX executives Gary Wang and Nishad Singh
- The case also names US accounting firms Armanino and Prager Metis, who are accused of preparing reports that “found the FTX companies to be in good financial shape.”
- The case was filed on the day that Bankman-Fried denied charges related to the FTX scandal
- FTX collapsed after borrowing billions of dollars to another Bankman-Fried firm, Alameda Research, run by Ellison
- Ellison has reached an agreement with the authorities prosecuting Bankman-Fried
Sam Bankman-Fried and his ex-girlfriend’s legal woes over FTX’s multi-billion dollar collapse have worsened after a lawsuit filed in California sought damages in “one of the largest fraud cases in US history”.
Bankman-Fried and Caroline Ellison, his former on-off lover who lived with the disgraced crypto mogul in his $40 million penthouse in the Bahamas, are named in a class-action lawsuit also filed against the others FTX executives Gary Wang and Nishad Singh judged.
The case also names US accounting firms Armanino and Prager Metis as defendants, accused of preparing reports that “found the FTX firms to be in good financial shape” and “cheerleading statements” of support by Bankman-Fried and the FTX Companies.”
The lawsuit was filed on Tuesday, the same day Bankman-Fried, 30, appeared in a New York court dismissing eight charges related to FTX’s collapse.
The lawsuit was filed on Jan. 3, the same day that Bankman-Fried appeared in a New York court and dismissed eight charges, including fraud, over the collapse of FTX, its failed crypto platform
His ex-girlfriend Caroline Ellison is also named in the lawsuit, which is seeking damages in what lawyers have called “one of the largest fraud cases in US history.”
Nishad Singh (left) and Gary Wang are also named in the class action lawsuit filed in California
The company collapsed after lending billions of dollars in client funds to another Bankman-Fried firm, Alameda Research, which was run by Ellison, 29. Alameda is accused of squandering the fortune on risky investments that didn’t pay off.
In documents for the California lawsuit viewed by , attorneys are seeking damages for FTX customers for claims including fraud, negligent misrepresentation and civil conspiracy.
It adds: “As alleged herein and currently spilled in the parade of lawsuits being pursued against Bankman-Fried, Ellison and Wang, the FTX units were essentially operated as a Ponzi scheme.”
The 14-Count indictment describes the scandal as the “FTX house of cards that has now collapsed in one of the largest fraud cases in US history.”
Attorneys cite several of the other legal cases against FTX and also note scathing reviews of the company made during its bankruptcy proceedings.
The FTX founder and Ellison were lovers, but their relationship appears to be in tatters after striking a deal with authorities who are charging Bankman-Fried with fraud. The couple are pictured together at a birthday party for Bankman-Fried
Detailing the allegations against the accounting firms, the attorneys add, “A key component of the highly lucrative marketing campaign included the air of legitimacy contained in the auditors’ alleged audit work and other supporting statements.”
Armanino and Prager are said to have “issued certified reports purporting to find that the FTX entities are in good financial health.”
“Armanino and Prager each released what have been described in the press as “cheerleading” statements in support of Bankman-Fried and the FTX entities in 2021 and 2022,” the case said.
‘These “encouraging” statements refute any claim of auditor independence by any of the defendant auditors’. Lawyers point to “numerous red flags” that are said to be “hanging in front” of the accounting firms.
The lawsuit relates to FTX’s aggressive promotions, including a multimillion-dollar Super Bowl ad starring Larry David, in which he rejected crypto before telling viewers, “Don’t be like Larry.”
The plaintiff’s name is Julie Chon Papadakis, a Puerto Rican resident who deposited an unspecified amount into an FTX account and was unable to withdraw the funds.
The case states that FTX achieved “mass accumulation of funds from clients” through aggressive advertising campaigns. Lawyers cite the 2022 Super Bowl commercial starring Larry David as an example of the tactic used to woo clients.
It also describes Bankman-Fried’s tweets after the company’s collapse, in which he admits, “I screwed up.”
Attorneys for Kaplan Fox & Kilsheimer and Wites Law Firm filed the class action lawsuit, requesting a jury trial. According to the estimate, there are “more than a million members in the proposed class.”
Armanino and Prager Metis have been contacted for comment. Armanino has previously opened up about his work for FTX.