FTX founder Sam Bankman-Fried has sued US insurer CNA for allegedly failing to pay out on a policy taken out to meet his legal bills, after $10 million (€9.5 million) in cover from London-based Beazley and Australia’s QBE maxed out.
As his New York trial got under way this week, Mr Bankman-Fried filed a legal complaint against a unit of Chicago-based CNA, saying that the company had not paid out on directors and officers’ insurance intended to cover defence costs.
One $5 million policy provided by Beazley, and a second of the same amount from QBE, were exhausted after the insurers agreed to pay up, according to the legal filing. That should have triggered the so-called excess policy provided by CNA, which also has a limit of $5 million, Mr Bankman-Fried’s lawyers argued.
The question of how Mr Bankman-Fried would pay the multimillion-dollar bill for his defence has remained unclear after the former crypto billionaire claimed that almost all his wealth was wiped out in the collapse of FTX.
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Mr Bankman-Fried had tried to secure more than $400 million worth of Robinhood shares, owned by one of his companies, claiming through lawyers that he “requires some of these funds to pay for his criminal defence”. His arguments were unsuccessful and the shares, seized by the US justice department, were sold back to the US brokerage firm in September.
The new management running FTX in bankruptcy claimed in a lawsuit last month that Mr Bankman-Fried gave his parents, Joe Bankman and Barbara Fried, a $10 million cash gift originating from Alameda, Mr Bankman-Fried’s trading firm. A representative for Mr Bankman and Ms Fried has said the lawsuit’s claims are “completely false”. The money has been used for Mr Bankman-Fried’s criminal defence, FTX has alleged.
The two law professors had previously pledged their California home to help secure their son’s bail. A spokesperson for Mr Bankman-Fried declined to comment.
Despite “numerous requests” by Mr Bankman-Fried, CNA has “unjustifiably failed to make timely payment” on his claims, the complaint states.
These alleged breaches of the policy “have caused, and threaten to cause, substantial and irreparable harm” to Mr Bankman-Fried, including the “impairment of Mr Bankman-Fried’s defence against the numerous criminal and civil claims asserted against him”.
The legal complaint demands that CNA be directed to pay towards his defence costs, and says substantial monetary damages have also been incurred, in excess of $75,000.
CNA and Beazley declined to comment. QBE did not respond immediately to a request for comment.
Insurers have been cautious about taking on crypto firms and founders as clients, given concerns about the risks presented by the sector, but D&O policies represent one of the industry’s biggest areas of exposure to crypto, according to brokers. – Copyright The Financial Times Limited 2023
