Sam Bankman Fried’s new petition to have his legal expenses reimbursed has been met with fierce objection from lawyers representing the crypto exchange and its creditors committee.
As per previous reporting by Cointelegraph, Bankman-Fried’s lawyers had filed a motion on March 15 seeking to have his court costs covered by directors and officers (D&O) insurance policies, which if approved by the judge would see him placed at the top of the payout queue.
Defense costs are covered in most policies (after a deductible) but insurers have provisions for selection of counsel so even if approved the insurer is unlikely to approve the high priced lawyers SBF has (or needs).
— Mr. Purple (@MrPurple_DJ) March 16, 2023
In March 29 objection filing, FTX’s lawyers objected to Bankman-Fried’s attempt to prioritize his own legal fees at the expense of other potential claimants, stating:
“It would be unfair, inequitable, and contrary to the interests of justice to allow Mr. Bankman-Fried to drain the D&O Policies for his sole benefit”
FTX’s lawyers argue that if the court rules in favor of Bankman-Fried then the insurance payout should apply to other directors and officers who have a claim to the funds.
The Official Committee of Unsecured Creditors also filed an objection on the same day, noting that D&O insurance policies only apply “where they make honest decisions in the ordinary course of the business,” which it argues “is not the case” regarding Bankman-Fried’s request.
The committee argued that the court should thus decline the request, labeling Bankman-Fried the “alleged perpetrator of one of the largest criminal frauds in the last decade.”
This sentiment has been echoed by some from the crypto community prior to Sam Bankman Fried’s request.
Directors and officers (D&O) liability insurance is a type of insurance coverage that protects individuals from personal losses if they are sued as a result of serving as a director or an officer for a firm. Such policies can also be used by the firm to cover legal fees and costs incurred as a result of a lawsuit against a former officer or director.
The creditors committee however argued that Bankman-Fried had failed to justify his claim to the $10 million in available coverage which should instead go towards covering FTX’s losses.
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According to reports, the former FTX CEO is currently paying his legal fees with $10 million he had previously gifted to his father Joseph Bankman, after Bankman-Fried loaned the funds from Alameda Research.
Bankman-Fried was charged with 12 criminal counts on Feb. 22, which included numerous fraud charges, and was rounded up to a baker’s dozen on Feb. 28 following allegations that he used $40 million in an attempt to bribe a Chinese official.
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