Just days after its disgraced CEO was found guilty of wire fraud, conspiracy, and money laundering, former FTX execs are doing their best to keep the legal circus on the road by fighting over who deserves a cut of the firm’s insurance policies to pay their legal bills.
As reported by Bloomberg Law, the problem lies in the fact that there’s not enough money in the insurance pot to go around.
FTX was reportedly covered by four major insurers — Beazley Plc, QBE Insurance Group Ltd., Hiscox Ltd., and Continental Casualty Co. — each offering up to $5 million in coverage.
However, newly convicted Sam Bankman-Fried sued the Continental Casualty Co., in early October, claiming that it refused to pay his legal costs. Shortly afterward, the firm’s former chief regulatory officer Daniel Friedberg, who was accused of helping Bankman-Fried to steal customer funds, asked to join the suit.
According to Bloomberg, D&O insurers should be responsible for legal fees incurred by more than 20 former FTX employees, however, Friedberg pointed out that Bankman-Fried and other execs had used up the bulk of the $20 million directors and officers (D&O) policy while others — himself included — received nothing.
He also alleges that the insurer is acting in “bad faith” should it not allocate payments equally.
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In his suit, Bankman-Fried claimed that, while Beazley Plc and QBE Insurance Group paid out their full share earlier this year, Continental Casualty had paid out just $871,000 when it stopped sending in payments “on a current basis.”
Hiscox Ltd., meanwhile, deposited its funds with the US District Court for the Northern District of California in August and asked the court to decide how to divide it up. It reasoned that the distribution could be affected by information arising from any future trials.
According to Friedberg, he’s personally paid out somewhere in the region of $800,000 in one civil action after he was sued by FTX’s new management in July for helping Bankman-Fried.
In his motion to intervene, Friedberg said, “I have limited resources and will not be able to continue to fund my own defense.” He added that the insurers broke California’s equitable allocation rule by allowing Bankman-Fried to take the lion’s share of the funds just because he got there first.
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