FTX Asks Court To Deny SBF’s Use Of Company’s $10M Insurance To Pay Legal Fees

Key Points:

• FTX asked the court not to allow Sam Bankman-Fried (SBF) to drain the company’s $10 million insurance fund to pay his expensive legal fees.
• The Creditors Committee considers that each amount SBF is allowed to use in the insurance fund means a reduction in the amount of money that can be used to repay creditors.
• The action comes after reports that Bankman-Fried is funding his criminal legal defense with a gift Alameda Research gave his father.

FTX’s lawyers said in a court document that it was “unfair” that the court allowed the former CEO of FTX SBF to drain $10 million in company insurance money to pay his court fees.

Earlier this month, SBF filed a court application to use a $10 million insurance plan for FTX directors and employees to cover its lawyers in bankruptcy and criminal proceedings.

In a separate filing, an official committee of FTX’s unsecured creditors asked the judge to dismiss SBF’s request to use the company’s insurance to pay legal fees.

FTX believes that director and employee-only insurance policies are designed to protect the company and its directors and employees from making moral decisions in business. This does not happen with SBF.

“Directors and officers insurance policies exist to protect the company and its directors and officers in situations where they make honest decisions in the ordinary course of the business. This is not that case,”

the committee said in a court filing on Wednesday

In a separate filing, the Official Committee on Unsecured Creditors, a group of clients of companies affiliated with FTX or FTX, asked the judge to deny Sam’s absurd claim.

According to the committee, the debtors of SBF and FTX shared $10 million under the insurance scheme. Every dollar effectively spent on SBF’s legal fees reduces the amount available to pay creditors.

After rumors that Bankman-Fried is paying for his criminal defense with a gift his father received from his insolvent cryptocurrency trading company Alameda Research, FTX released a statement, and the committee objected. Bankman-Fried is charged with mishandling FTX client cash and utilizing the funds, among other offenses, to support Alameda Research and make unauthorized political contributions.

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