September 20, 2023 at 09:29 GMTModified date: September 20, 2023 at 09:29 GMT
September 20, 2023 at 09:29 GMT

Stanford University will refund millions of dollars of ‘gifts’ to FTX

Stanford University has said it will return millions of dollars worth of gifts it received from FTX, the bankrupt cryptocurrency exchange.

Stanford University. Pic: Unsplash

Stanford University has said it will return millions of dollars worth of gifts it received from FTX, the bankrupt cryptocurrency exchange.

“We have been in discussions with attorneys for the FTX debtors to recover these gifts and we will be returning the funds in their entirety,” a university spokesperson told Bloomberg.

The parents of FTX founder Sam Bankman-Fried, both professors at Stanford Law School, were sued by the exchange this week for “fraudulently” misappropriating millions of dollars. This includes $5.5m that was donated to Stanford University. 

FTX sues Bankman and Fried

Documents from the court filing this week accuse Joseph Bankman and Barbara Fried of fraudulently transferring and misappropriating funds.

FTX, along with its affiliate hedge fund Alameda Research, aims to recover the alleged misappropriated millions. The lawsuit alleges that the parents exploited their positions within FTX for personal gain.

It also claimed that Bankman had knowledge of questionable business practices within FTX, which saw the exchange and its founder charged by the SEC for fraud. 

As perks for his official legal position in the company, Bankman reportedly accepted millions in gifts, ranging from private jet flights and luxury hotel stays to tickets for the Formula One French Grand Prix. He was also featured in the FTX Super Bowl Commercial.

Fried was also involved with the misappropriation of millions of dollars from the exchange. 

In 2018, she co-founded MTG, a political action committee The document claims that MTG relied heavily on FTX and Bankman-Fried for its funding. 

On top of this, it’s alleged that the parents used money from the exchange to fully fund their purchase of a luxury property in The Bahamas.

Both parents denied these allegations. They labeled the accusations as “completely false”. Their lawyer told CoinDesk: “This is a dangerous attempt to intimidate Joe and Barbara and undermine the jury process just days before their child’s trial begins.”

FTX’s efforts to compensate debtors

Last week, FTX, which declared bankruptcy in 2022, secured permission from a US court to liquidate its cryptocurrency assets. The move is aimed at repaying the company’s customers in US dollars.

The green light was given by Judge John Dorsey, who granted the defunct cryptocurrency firm the right to sell $3.4billion in assets, including popular cryptocurrencies like Solana, Ethereum, and Bitcoin. The proceedings took place at the US Bankruptcy Court for the District of Delaware.

FTX’s proposed plan involves capping its weekly sales to $100m worth of tokens. However, under certain conditions, this limit could be stretched to $200m. 

During this hearing, Judge Dorsey overruled concerns by a couple of FTX customers. They feared that such large-scale sales by FTX could destabilise crypto prices. There were also concerns raised about FTX’s ownership of all the crypto assets in its accounts.

FTX claimed it was aware of this risk and hired the investment firm Galaxy to mitigate it. It would ensure there was no “information leakage”, which could lead to short-selling activity in the market. 

The cryptocurrency exchange argued that maintaining its current crypto holdings is also risky, as price declines could affect its ability to repay debtors. 

Since its bankruptcy last year, FTX has recovered more than $7bn in cryptocurrencies to refund its debtors. The exchange is also pursuing other recovery methods, including its lawsuits against Bankman-Fried’s parents and FTX insiders.