Sam Bankman-Fried, the former CEO of cryptocurrency exchange FTX, is looking to tap into the company’s director and officer liability insurance to cover his mounting legal expenses, according to court documents filed on Wednesday.
Lawyers representing Sam Bankman-Fried contend that he is entitled to use the insurance policy to pay his legal bills, as the charges against him stem from his time as FTX’s top executive.
Sam Bankman-Fried Wants On Top Of The Payout List
In a motion, Bankman Fried’s legal team asked the court to let his insurers, Relm Insurance and Beazley Insurance, advance or refund his defense costs and fees under his directors and officers (D&O) insurance policy.
The policies, according to the petition, give “priority of payment to individual insureds with un-indemnified loss like Mr. Bankman-Fried.”
Sam Bankman-Fried. Image: Reuters
A D&O insurance is like a safety net for high-ranking executives, protecting them from legal and financial risks that come with their positions. It’s a type of liability insurance that companies purchase to provide coverage for their executives’ legal defense costs and settlements in the event they are sued for alleged wrongful acts committed while carrying out their duties.
Think of it as a shield that guards against lawsuits aimed at holding executives personally liable for their actions while leading a company. D&O insurance typically covers claims of negligence, breach of duty, mismanagement, and other errors that may arise in the course of an executive’s work.
What Happens If Sam Bankman-Fried Gets Approved Of A D&O?
If the court grants Bankman-Fried’s request, the former billionaire would be given priority over the other FTX creditors in receiving any reimbursement from the company, something the company’s new management has been fighting against.
While D&O insurance can provide a measure of protection, it is not a get-out-of-jail-free card. Executives still need to act in good faith, exercise due diligence, and make sound business decisions. The policy’s coverage is subject to certain limitations and exclusions, and some claims may not be covered.
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The deadline for filing responses or objections to the motion is March 29, 2023. If necessary, a hearing will be held at the U.S. Bankruptcy Court for the District of Delaware on April 12, 2023. Bankman-Fried requests that the court grant the sought relief without further notice if no responses or objections are filed.
Bankman-Fried faces a multitude of criminal charges for alleged misconduct. The former FTX big boss may spend the rest of his life in prison if he is found guilty of all charges in his October trial.
According to experts, Bankman-Fried’s defense could cost millions of dollars.
-Featured image from ABC-Amega
