Temasek, Softbank Hit With FTX Lawsuit

Posted on 08/24/2023

Financial firms including AI-focused Softbank and government investors including Singapore’s Temasek are defendants in a class-action lawsuit filed in the United States District Court for the Northern District of California due to dealings with FTX. The lawsuit says they are responsible for placing “billions of dollars” into FTX. Allegedly “FTX returned the favor” after they made it possible for Sam Bankman-Fried and others to level up FTX to its lofty heights before it utterly collapsed. The suit claims that the defendants knew FTX was in distress but “sought to keep the fraud concealed” in order to emerge “relatively unscathed.”

Interestingly, the suit begins with the following accusation: “FTX Group’s new CEO—who helped wind down Enron—concluded the fraud here was worse than Enron. Billions of dollars have been stolen from investors.”

The suit summarizes in plain language the alleged crimes committed: “On one hand, SBF [Sam Bankman-Fried] and the FTX Group stole customer deposits and used billions of dollars in customer funds to support the operations and investments of FTX and Alameda, to fund speculative venture investments, to make charitable and political contributions, and to personally enrich SBF himself, all while publicly touting the safety of the investment and the segregation of customer funds. The Deceptive FTX Platform 2 maintained by the FTX Group was truly a house of cards, a Ponzi scheme where the FTX Group shuffled customer funds between their opaque affiliated entities, using new investor funds obtained through investments in the Deceptive FTX Platform, the YBAs, FTT, and/or loans to pay interest and investment withdrawals to the old ones and to attempt to maintain the appearance of liquidity. On the other hand, the FTX Group offered and sold securities without proper registration, thereby depriving Plaintiffs of financial and risk-related disclosures that would have impacted their calculus as to whether to invest in the FTX Group. Rather than heed the myriad warnings from the SEC dating as far back as 2017, the FTX Group chose instead to skirt US regulation through deception. This conduct violates numerous laws.”

Named plaintiffs are Leandro Cabo, Vitor Vozza, Kyle Rupprecht, Warren Winter, and Sunil Kavuri. The case is Cabo v. Temasek Holdings Limited

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