EXCLUSIVE: Sam Bankman-Fried and ex-girlfriend face another legal battle as California class-action suit seeks damages for ‘one of the biggest frauds in US history’ – and goes after FTX’s US accountants
- Bankman-Fried and Caroline Ellison are named in a class action that also targets FTX executives Gary Wang and Nishad Singh.
- The lawsuit also names U.S. accounting firms Armanino and Prager Metis as having prepared reports showing the “good financial condition of the FTX Entities.”
- The case was filed the same day Bankman-Fried denied charges related to the FTX scandal
- FTX collapsed after Bankman-Fried loaned billions of dollars to Alameda Research, a firm controlled by Ellison.
- Ellison struck a plea deal with the authorities who prosecuted Bankman-Fried
Sam Bankman-Fried and his ex-girlfriend’s legal woes over the multibillion-dollar bankruptcy of FTX have deepened after a lawsuit filed in California seeks damages for “one of the biggest frauds in US history.”
Bankman-Fried and his ex-girlfriend, Caroline Ellison, are named in a class-action suit that also targets FTX executives Gary Wang and Nishad Singh, who shared their $40 million Bahamas penthouse with the disgraced crypto tycoon.
The lawsuit also names US accounting firms Armanino and Prager Metis as defendants, alleging that they prepared reports “finding that the FTX Entities were in good financial condition” and made “cheerleading” statements to “support Bankman-Fried and the FTX Entities.”
The plea was filed Tuesday, the same day Bankman-Fried, 30, appeared in a New York court and pleaded not guilty to eight charges related to the FTX’s bankruptcy.
The lawsuit was filed on January 3, the same day Bankman-Fried appeared in a New York court and pleaded not guilty to eight charges, including fraud, related to the failure of the failed cryptocurrency FTX.
His former girlfriend, Caroline Ellison, is also named in the lawsuit, which seeks damages for what lawyers say is “one of the biggest frauds in US history.”
Nishad Singh (left) and Gary Wang are also named in the criminal case filed in California.
The company collapsed after Bankman-Fried loaned billions of dollars in client funds to another firm, Alameda Research, run by Ellison, 29. Alameda has been accused of funneling its assets into risky investments that have not paid off.
In filings filed in California seen by DailyMail.com, attorneys are seeking damages against FTX clients for claims including fraud, negligent misrepresentation and civil conspiracy.
It adds: ‘As alleged here, and as is now being spread in the parade of transactions against Bankman-Fried, Ellison and Wang, the FTX Entities were essentially run as a Ponzi scheme.’
The 14-person lawsuit describes the scandal as “an FTX house of cards that collapsed in one of the largest frauds in US history.”
The lawyers cite several other court cases against FTX and also point to the firm’s damning valuations during the bankruptcy proceedings.
The FTX founder and Ellison were on-and-off lovers, but their relationship fell apart after she struck a plea deal with authorities prosecuting Bankman-Fried on fraud charges. The pair were photographed together at a birthday party for Bankman-Fried
The lawyers detailing the claims against the accounting firms add: ‘A key component of the highly profitable promotional marketing campaign involved the air of legitimacy provided by the Auditor Defendants’ audit work and other supporting testimony.’
Armanino and Prager are said to have “issued certified statements asserting that the FTX Entities are in good financial condition.”
“Armanino and Prager published what they coined as “cheerleading” in the press to support Bankman-Fried and FTX Entities in 2021 and 2022,” the lawsuit states.
These statements of “cheerfulness” negate any claim of auditor independence by any of the Auditor Respondents. Lawyers cite ‘numerous red flags’ allegedly ‘dangling in front’ of accounting firms.
The suit relates to FTX’s aggressive advertising, including a Super Bowl ad starring Larry David, in which he rejects cryptocurrency before telling viewers to “don’t be like Larry.”
The plaintiff is identified as Julie Chon Papadakis, a resident of Puerto Rico who deposited an unspecified amount into an FTX account and was unable to withdraw the money.
The case says that FTX managed to “raise massive funds from customers” through aggressive promotional campaigns. Lawyers point to the 2022 Superbowl ad featuring Larry David as an example of a tactic to attract clients.
It also details Bankman-Fried’s tweets following the firm’s collapse, in which she admits: ‘I was devastated.’
Attorneys at Kaplan Fox & Kilsheimer and Wites Law Firm have filed criminal charges and requested a jury trial. It is estimated that there are “more than one million members in the proposed Class”.
Armanino and Prager Metis reached out for comment. Armanino previously supported his work for FTX.