FTX’s co-founder is seeking access to a $10 million insurance plan to cover legal fees, court filings reveal, FTX debtors and unsecured creditors, opposed Sam Bankman-Fried’s request, arguing that the cost of his defense would “reduce by one dollar” the amount available to cover the debtors’ losses.
FTX Debtors and Unsecured Creditors Oppose Sam Bankman-Fried’s Request for D&. O Funds
Sam Bankman-Fried (SBF), former CEO of FTX, is seeking access to $10 million in attorney insurance to cover his legal defense costs. According to the filing, FTX’s $10 million Directors and Officers (D&O) policy covers “individuals who are legally obligated to assume and pay for the first claim made against them.” However, FTX’s Debtor and Unsecured Creditors Committee has criticized SBF’s request, arguing that granting SBF access to the insurance proceeds would harm the debtor and cause “material detriment.”
“Therefore,” the Debtors declare, “for every dollar the insurance company dedicates to Mr. Bankman-Fried’s defense costs, there will be one dollar less to pay the WRS Debtors’ compensated losses.
The Debtors emphasize that the insurance policy excludes claims arising from “violations of securities laws, violations of money laundering laws, and intentional or fraudulent acts or omissions.” Counsel d&explain that because the O Policy belongs to the debtor’s estate, the court should not allow Sam Bankman-Fried unrestricted access to it.
Instead, the Debtor believes that the Court should require SBF to comply with the Bankruptcy Court’s 2016 Compensation Rules, which SBF claims deplete D&; the O Policy does not harm the Debtor’s estate, but the Debtor and unsecured creditors strongly disagree, states that this argument is “flat wrong.”
The court’s filing states:
Mr. Bankman-Fried is also wrong to argue that compensation for the debtor’s estate is “hypothetical or speculative” and that the debtor has “no present contractual interest in the proceeds of D&. o insurance. As noted above, the Debtor has retained Pool Counsel to represent certain current or former employees of the Debtor, and their fees are an insurable expense.
SBF’s recent objection to D&’s request that O funds allegedly use Alameda funds to pay for its own defense costs, according to sources cited by Forbes, a $10 million gift SBF gave to his father in 2021, allegedly used to pay for the expenses of a white-collar defense attorney.
Do you think Sam Bankman-Fried should be granted access to a $10 million attorney insurance fund for defense costs or should the court require him to follow the bankruptcy court’s 2016 compensation rules? Share your thoughts in the comments below.
Image Credit:: Shutterstock, Pixabay, Wiki Commons.