Bankman-Fried Denied Access to FTX’s Officers Insurance Coverage

Sam Bankman-Fried, the embattled founder of FTX, failed in his bid to potentially tap up to $10 million worth of the failed crypto trading platform’s insurance policies for his legal defense costs.

Bankman-Fried has provided “zero evidence” showing why he should be allowed to tap directors and officers insurance policies issued to an FTX entity, West Realm Shires Inc., Judge John T. Dorsey of the US Bankruptcy Court for the District of Delaware ruled at a hearing Wednesday.

The criminally-indicted former head of FTX had sought to lift the company’s bankruptcy protections in an effort to access funds that would help cover mounting legal costs stemming from multiple class action suits and government cases.

FTX and its creditors opposed his request, arguing that he shouldn’t be entitled to the policies’ benefit before others. Ruling after the parties failed to reach an agreement, Dorsey said he had “no choice but to deny the motion for lack of evidence.”

Bankman-Fried has so far failed to show what harm he might endure without the coverage and what other assets he has to cover his legal expenses, the judge said.

But Bankman-Fried is free to come back at some point in the future to make his case for relief through an evidentiary hearing, Dorsey concluded.

The one-time billionaire and crypto icon is seeking funds from the policies following the spectacular collapse of his cryptocurrency trading platform and closely linked investment firm Alameda Research last year. He faces myriad allegations of running businesses built on extreme mismanagement and fraud.

The case is In re FTX Trading Ltd., Bankr. D. Del., No. 22-11068, hearing 4/12/23.