FTX Foundation employee sues for unpaid bonus after founder’s arrest

A former employee of the FTX Foundation, the charitable arm of the bankrupt cryptocurrency exchange FTX, has filed a lawsuit against the foundation and its founder, Sam Bankman-Fried, for failing to pay him a $275,000 bonus that was promised by Bankman-Fried before his arrest on fraud charges.

According to the complaint, which was filed in the U.S. District Court for the Southern District of New York on Monday, the plaintiff, John Doe, was hired by the FTX Foundation in June 2022 as a senior program manager. His annual salary was $175,000, plus a bonus of 10% of the foundation’s net income, which was expected to be around $2.75 million for the year 2022.

FTX Foundation employee sues for unpaid bonus after founder’s arrest
FTX Foundation employee sues for unpaid bonus after founder’s arrest

The complaint alleges that in November 2022, Bankman-Fried, who was the sole director and president of the foundation, verbally agreed to pay Doe a bonus of $275,000, which was 10% of the foundation’s net income as of October 31, 2022. Bankman-Fried also allegedly told Doe that he would receive the bonus by December 15, 2022.

However, on December 12, 2022, Bankman-Fried was arrested in the Bahamas and extradited to the U.S., where he was indicted on seven criminal charges, including wire fraud, securities fraud, and money laundering. The indictment accused him of running a Ponzi scheme that defrauded investors of more than $1 billion through FTX, which was one of the largest cryptocurrency exchanges in the world.

The complaint claims that after Bankman-Fried’s arrest, the FTX Foundation ceased its operations and failed to pay Doe his bonus, despite repeated requests. Doe also alleges that the foundation and Bankman-Fried breached their employment contract and violated the New York Labor Law.

The FTX Foundation’s mission

The FTX Foundation was established in March 2022 by Bankman-Fried, who pledged to donate 1% of FTX’s net revenue to the foundation every year. The foundation’s mission was to support charitable causes related to environmental, social, and governance (ESG) issues, such as climate change, animal welfare, and human rights.

The foundation claimed to have donated more than $10 million to various organizations, such as GiveDirectly, Clean Air Task Force, and The Good Food Institute. The foundation also partnered with celebrities, such as Tom Brady, Gisele Bündchen, and Kevin O’Leary, to promote its philanthropic initiatives.

However, the complaint alleges that the foundation was a sham and a front for Bankman-Fried’s fraudulent activities. The complaint states that the foundation’s net income was derived from FTX’s illicit profits, and that the foundation’s donations were used to launder money and evade taxes.

The FTX saga

The lawsuit by Doe is the latest development in the FTX saga, which has rocked the cryptocurrency industry and sparked investigations by regulators and law enforcement agencies around the world.

FTX, which was founded by Bankman-Fried in 2019, was once valued at $18 billion and had more than 10 million users. The exchange offered a variety of products and services, such as futures, options, leveraged tokens, prediction markets, and decentralized finance (DeFi).

However, in November 2022, a whistleblower revealed that FTX was operating a Ponzi scheme that used fake trading volume, manipulated prices, and siphoned funds from customers’ accounts. The whistleblower also alleged that Bankman-Fried was involved in various illegal activities, such as insider trading, market manipulation, bribery, and tax evasion.

The revelation triggered a panic among FTX’s customers, who tried to withdraw their funds from the exchange. However, FTX was unable to process the withdrawals, as it had insufficient liquidity and reserves. The exchange also faced legal actions and regulatory scrutiny from various jurisdictions, such as the U.S., the U.K., Hong Kong, and Singapore.

On December 1, 2022, FTX filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware, citing liabilities of more than $2 billion and assets of less than $500 million. The bankruptcy filing also revealed that FTX had been under investigation by the U.S. Department of Justice, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission since October 2022.

On December 12, 2022, Bankman-Fried was arrested in the Bahamas, where he had been living since September 2022. He was extradited to the U.S., where he pleaded not guilty to the charges against him. He was released on a $250 million bond, secured by four guarantors, including his parents, who are both professors at Stanford Law School.

Bankman-Fried is facing two trials, one for the fraud and conspiracy charges, and another for the bank fraud and bribery charges. If convicted, he could face up to 200 years in prison.

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