In a surprising turn of events, Alameda Research, the hedge fund arm of the once-prominent FTX empire, is demanding the return of $700 million from founder Sam Bankman-Fried. The funds in question are believed to have been used to secure access to influential celebrities and politicians, media reports said.
Lawyers representing FTX’s new management have accused Bankman-Fried of treating the company’s finances as a “slush fund” and disregarding proper corporate procedures. They argue that Bankman-Fried paid substantial amounts to well-connected individuals, such as Michael Kives and Bryan Baum, without receiving any substantial benefit for Alameda Research.
The court filing alleges that Kives, a former aide to both Bill and Hillary Clinton, and Baum, knowingly accepted money that ultimately benefited Bankman-Fried personally. FTX’s lawyers assert that Bankman-Fried displayed a lack of diligence when investing billions in Kives’ and Baum’s ventures, failing to conduct adequate due diligence or outline the expected returns for FTX.
One incident that raised eyebrows occurred during a star-studded party hosted by Kives in February 2022. Bankman-Fried, seemingly starstruck by the presence of high-profile guests, hastily committed to investing billions in Kives’ and Baum’s companies. The court filing describes the resulting term sheet as superficial and lacking in detail.
Moreover, Bankman-Fried’s handling of corporate affairs came under scrutiny. He failed to clarify the nature of Baum’s affiliation with FTX, referring to it as “sorta complicated and liminal and unclear.” This lack of transparency further raised concerns about his management practices.
According to the court filing, transfers totaling $700 million from Bankman-Fried’s companies to Kives and Baum appear to have violated bankruptcy laws. The transfers were allegedly concealed, inflated in value, and made when FTX was on the brink of insolvency.
Responding to the allegations, a spokesperson for Kives’ company, K5, expressed surprise and stated that they believed Bankman-Fried to be legitimate. The spokesperson emphasized that they entered into a business relationship with the expectation of mutual benefit.
As this legal battle unfolds, the allegations against Bankman-Fried and the subsequent bankruptcy of FTX have shed light on the need for greater corporate oversight and transparency within the financial industry. The outcome of this case could have far-reaching implications for the accountability of high-profile individuals and the management of hedge funds.
