FTX’s legal counsel asked the company’s directors and officers’ insurance to advance or pay Bankman-Fried’s defense costs and fees. Sam Bankman-Fried submitted a legal document on March 15 intending to use FTX’s insurance coverage to pay for his legal expenses.
The director’s and officers’ (D&O) insurance policies held with Relm Insurance and Beazley Insurance were requested by the legal counsel for the former FTX CEO in a motion to permit insurers to advance or reimburse his defense costs and fees. According to the petition, the policies provide “individual insureds with un-indemnified losses like Mr Bankman-Fried priority of payment.” In other words, the former CEO would get the top FTX payout. The document stated, in part:
Based on the foregoing, Mr Bankman-Fried makes the case that there is adequate justification to lift and modify the automatic stay, enabling Relm and Beazley to (a) reimburse Mr Bankman-Fried for covered defense costs already incurred under the D&O Policies, and (b) advance future covered defense costs up to the point at which they cease to be Non-Indemnifiable Losses under the D&O.
In order to “protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization,” directors and officers liability insurance, according to Investopedia, also covers legal fees and other costs associated with a lawsuit.
By March 29, 2023, responses or objections to the motion must be submitted. On April 12, 2023, at the United States Bankruptcy Court for the District of Delaware, a hearing will be placed if necessary. Bankman-Fried requests that the court approves the relief request without further notice if no replies or objections are submitted.
The former CEO is involved in “several criminal, regulatory, insolvency-related and civil procedures,” according to Bankman-legal Fried’s representative. These actions include one criminal process, three federal and state regulatory proceedings, five insolvency-related hearings, as well as seven legal actions.
Bankman-Fried now faces a total of 12 criminal charges, including four counts each of wire fraud and securities fraud, as well as four new criminal counts brought against him by the federal judge reviewing his case on February 23. His legal expenses are anticipated to be in the nine figures.
According to a recent report, FTX paid a total of $34.18 million in January to law firms, investment banks, and consultancy firms working on its bankruptcy case. John J. Ray III, the chief restructuring officer and new CEO of FTX, was given a hefty salary of $305,000, or $1,300 per hour.