Days after Sam Bankman-Fried, former FTX CEO, was found guilty on all seven criminal charges, the legal turmoil surrounding the fallen crypto exchange continues. Former FTX executives are now in a heated dispute over who deserves a share of the company’s insurance policies to cov...
Insurance Lawsuit Unveils Discord Among FTX Executives
Per the report, the dispute over insurance coverage extends beyond FTX. It raises broader questions about the fair allocation of directors’ and officers’ insurance payments when numerous executives are vying for limited funds.
FTX directors and officers insurers are now facing the challenge of covering legal fees for over 20 executives who are targets of criminal investigations and civil lawsuits linked to the collapsed exchange.
Former Executive Decries Insufficient Resources For Legal Defense
According to Bloomberg, Friedberg, whom FTX’s new management has accused of being a “fixer” for Bankman-Fried and the company, argues that the insurers act in “bad faith” if they do not allocate the payments equally.
This objection came after FTX’s new management sued Friedberg, accusing him of assisting Bankman-Fried in embezzling billions in customer funds.
Friedberg, who claims to have paid over $800,000 in defense costs “out of pocket” and failed to secure D&O coverage, argued that he lacked the resources to continue funding his defense.
FTX’s insurance coverage involves four D&O insurers, each with a $5 million policy limit. The primary insurer, Beazley Plc, and the first “excess” insurer, QBE Insurance Group, paid their total share earlier this year.
The second excess insurer, Continental Casualty, a subsidiary of CNA, had disbursed over $871,000 by September but then ceased further payments as required by the policy, according to Bankman-Fried’s complaint.
Hiscox stated that the distribution might be influenced by facts uncovered during litigation against FTX and its executives, including future trials.
According to Bloomberg, the outcome of the insurance dispute may also be influenced by evidence emerging from litigation that Bankman-Fried and other FTX executives may have misrepresented the company’s financials on the insurance application.
Featured image from Shutterstock, chart from TradingView.com