The disgraced founder of the failed cryptocurrency exchange is facing legal bills in the millions of dollars and wants "priority" access to the firm's director and officer insurance.
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Sam Bankman-Fried would like FTX's new management to make paying his legal bills a priority — and put him on top of the payout list.
Specifically, SBF is asking the bankruptcy court to give him access to FTX's $10 million director and officer insurance policies.
These cover legal expenses not indemnified by the company for "all loss … which the insured persons become legally obligated to pay on account of any claim first made against them … for a wrongful act," the filing said.
Beyond that, the insurance "provides priority of payment to individual insured with unindemnified loss like Mr Bankman-Fried," and requires the company to waive objections to those payments. It added:
"The D&O Policies contractually require the company and its subsidiaries to indemnify and advance expenses to the individual insureds."
Which means Bankman-Fried could get a payout running into the millions of dollars before anyone else in the bankruptcy proceedings sees a dime.
Plenty of Legal Bills
The D&O coverage is needed, the filing said, because the disgraced founder and former CEO of FTX "has been named as a defendant or is otherwise involved in criminal, regulatory, civil, and other actions and proceedings that have resulted in — and can be expected to continue to result in — significant unreimbursed legal fees and other expenses."
His criminal defense alone is expected to run to several million dollars.
SBF is facing 12 charges including multiple counts of fraud and conspiracy, as well as anti-money laundering and campaign finance law violations in relation to the alleged theft of $10 billion worth of FTX customer funds to prevent his private trading firm Alameda Research from going bust. At least $8 billion appears to have been lost, and three former top executives of the two firms have pleaded guilty to fraud charges.
D&O policies are very common, and in many cases — including this one, according to the filing — provide benefits to the company, but only after the primary officers claims have been paid.
Along with federal criminal charges, the filing details that Bankman-Fried is facing three suits by regulators — including the Securities and Exchange Commission, Commodity Futures Trading Commission and Texas State Securities Board. Then there are the five insolvency-related cases and seven civil lawsuits.<div><iframe width="100%" height="166" scrolling="no" frameborder="no" allow="autoplay" src="https://w.soundcloud.com/player/?url=https%3A//api.soundcloud.com/tracks/1470311764&color=%23ff5500&auto_play=false&hide_related=false&show_comments=true&show_user=true&show_reposts=false&show_teaser=true"></iframe></div>