- Bankman-Fried sues CNA, alleging negligence in covering legal costs for fraud defense against U.S. prosecutors.
- Hiscox’s D&O policy becomes active after $15 million primary coverage, prompting an interpleader action.
- Paper Bird’s ownership of FTX Ventures and D&O insurance payout dispute involving Bankman-Fried and creditors.
Sam Bankman-Fried, a prominent figure in the cryptocurrency industry, has initiated legal action against his insurer, CNA, claiming they have neglected their responsibility to cover the legal expenses associated with his defense against accusations of fraud. Bankman-Fried maintains his innocence in response to the fraud charges brought against him by U.S. prosecutors, with his trial commencing this Tuesday. Additionally, the legal suit filed against CNA highlights his involvement in around twelve civil and regulatory cases pertaining to the collapse of his cryptocurrency exchange, FTX.
The lawsuit asserted that Continental Casualty is the underwriter of Paper Bird’s “secondary excess policy within the D&O insurance stack.” Directors and officers (D&O) insurance safeguards company executives from individual financial losses in case they face legal action. This coverage is structured as a figurative stack of policies, where each policy layer becomes active when the one beneath it reaches its coverage limit.
As per the lawsuit, Bankman-Fried’s primary D&O coverage consisted of $10 million, sourced from two insurers, while Continental Casualty’s policy was meant to contribute $5 million. The policy stipulated that payments should occur promptly. It encompassed the expenses associated with defending against criminal charges, despite an exclusion clause for “fraudulent, criminal, and comparable actions.” Notably, there was no provision for the recovery of funds in the policy.
Moreover, the lawsuit pointed out that Beazley and QBE, the two primary D&O insurance providers for Paper Bird, fulfilled their obligations by covering Bankman-Fried’s defense expenses as per the policy terms. Bankman-Fried is now seeking that Continental Casualty also fulfills its contractual duty by covering his defense costs, in addition to seeking damages that encompass court-related expenses. The third tier of Paper Bird’s D&O insurance stack, which is offered by Hiscox Syndicates, is currently the focus of a legal dispute. Hiscox has initiated an Interpleader Complaint against Paper Bird and a comprehensive list of insured individuals, which includes Bankman-Fried. An interpleader action is a legal mechanism that requires the involved parties to resolve their claims among themselves through litigation.
As outlined in the complaint, which was lodged on August 9 in the Northern California District Court, the Hiscox policy becomes active once the $15 million in primary coverage is exhausted. The complaint indicated that Hiscox anticipated claims amounting to $5 million under its policy, necessitating the interpleader action to ensure an equitable distribution of policy funds.
The Hiscox complaint identified twenty individuals, all of whom were associated with FTX in various capacities, sometimes by their titles (such as department heads).
According to the Financial Times, Paper Bird held complete ownership of FTX Ventures and possessed an 89% stake in FTX Trading, which the newspaper referred to as “the core entity mentioned in FTX’s legal disclosures.” It’s worth noting that Paper Bird was entirely owned by Bankman-Fried.
Bankman-Fried attempted to obtain D&O insurance payouts through a policy issued to West Realm Shires, also known as FTX US. However, this endeavor faced opposition from FTX’s legal representatives and the committee of creditors, and it was ultimately blocked by the U.S. Bankruptcy Court for the District of Delaware.
According to the Financial Times, Paper Bird held complete ownership of FTX Ventures and possessed an 89% stake in FTX Trading, which the newspaper referred to as “the core entity mentioned in FTX’s legal disclosures.” It’s worth noting that Paper Bird was entirely owned by Bankman-Fried.
Bankman-Fried attempted to obtain D&O insurance payouts through a policy issued to West Realm Shires, also known as FTX US. However, this endeavor faced opposition from FTX’s legal representatives and the committee of creditors, and it was ultimately blocked by the U.S. Bankruptcy Court for the District of Delaware.
