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 swimsuit towards the Continental Casualty insurance coverage firm in the USA District Courtroom of Northern California. That firm has allegedly supplied Paper Hen and its subsidiary FTX Buying and selling administrators and officers (D&O) insurance coverage. The swimsuit was filed by Bankman-Fried as a person.
The swimsuit claimed that Continental Casualty is the supplier of Paper Hen’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 swimsuit towards them. Such protection will be organized right into a metaphorical tower of insurance policies, the place a coverage on a given layer comes into power when the coverage beneath it reaches its restrict.
In accordance with the swimsuit, the first layer of D&O protection supplied $10 million for Bankman-Fried’s protection from two insurers, and Continental Casualty’s coverage was meant to offer $5 million. The coverage mandated that funds be made on a present foundation. It coated the price of protection towards felony expenses, though there was an exclusion for “fraudulent, felony, and related acts.” There was no clawback provision within the coverage.
The swimsuit famous that Paper Hen’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 courtroom prices.
The third layer of Paper Hen’s D&O tower, supplied by Hiscox Syndicates, is the topic of courtroom motion as nicely. Hiscox has filed a Criticism for Interpleader towards Paper Hen 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 accordance with that grievance, 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 grievance acknowledged that Hiscox anticipated claims to be made below its coverage for $5 million in protection and the interpleading was obligatory to make sure honest disbursement of coverage funds.
Twenty people have been named within the Hiscox grievance. They have been all described as having connections to FTX, generally by title (head of a division).
In accordance with the Monetary Occasions, Paper Hen 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 Hen 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 legal professionals and the collectors’ committee and blocked by the U.S. Chapter Courtroom for the District of Delaware.