As the ultimate preparations for the trial of Sam Bankman-Fried have been underway in Manhattan, attorneys for the embattled former FTX CEO have been submitting a go well with in opposition to the Continental Casualty insurance coverage firm within the District Courtroom of Northern California. That firm has allegedly supplied Paper Chicken and its subsidiary FTX Buying and selling administrators and officers (D&O) insurance coverage. The go well with was filed by Bankman-Fried as a person.
The go well with claimed that Continental Casualty is the supplier of Paper Chicken’s “second-layer extra coverage within the D&O insurance coverage tower.” D&O insurance coverage protects the administrators and officers of an organization from private losses within the occasion of a go well with in opposition to them. Such protection could be organized right into a metaphorical tower of insurance policies, the place a coverage on a given layer comes into power when the coverage under it reaches its restrict.
In response to the go well with, the first layer of D&O protection supplied $10 million for Bankman-Fried’s protection from two insurers, and Continental Casualty’s coverage was supposed to supply $5 million. The coverage mandated that funds be made on a present foundation. It coated the price of protection in opposition to prison prices, despite the fact that there was an exclusion for “fraudulent, prison, and related acts.” There was no clawback provision within the coverage.
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The go well with famous that Paper Chicken’s two main D&O coverage suppliers, Beazley and QBE, paid his protection prices in response to the phrases of the coverage. Bankman-Fried is demanding that Continental Casualty pay his protection prices in response to its contractual obligation, together with damages, together with court docket prices.
The third layer of Paper Chicken’s D&O tower, supplied by Hiscox Syndicates, is the topic of court docket motion as nicely. Hiscox has filed a Criticism for Interpleader in opposition to Paper Chicken and a protracted record of insured individuals, together with Bankman-Fried. An interpleader motion compels the events in a authorized process to litigate their claims amongst themselves.
In response to that criticism, filed on Aug. 9 within the District Courtroom of Northern California, the Hiscox coverage comes into power after the $15 million in underlying protection. The criticism acknowledged that Hiscox anticipated claims to be made below its coverage for $5 million in protection, and the interpleading was mandatory to make sure honest disbursement of coverage funds.
Twenty people have been named within the Hiscox criticism. They have been all described as having connections to FTX, typically by title (head of a division).
In response to The Monetary Occasions, Paper Chicken was the complete proprietor of FTX Ventures and owned 89% of FTX Buying and selling. The newspaper described FTX Buying and selling as “the inspiration firm recognized in FTX’s authorized disclaimers.” Paper Chicken was wholly owned by Bankman-Fried.
Bankman-Fried sought to gather D&O insurance coverage funds below a coverage issued to West Realm Shires, which is extra generally known as FTX US. That effort was opposed by FTX attorneys and the collectors’ committee and blocked by the U.S. Chapter Courtroom for the District of Delaware.
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