A recent Law.com story by Jane Wester, “Sam Bankman-Fried Sues Insurer to Cover Defense Costs in New York Criminal Trial, Other Litigation”, reports that indicted FTX founder Sam Bankman-Fried sued an insurance firm for assistance with his defense costs, one day before jury selection began in his fraud trial in Manhattan. Bankman-Fried’s attorneys at Lewis & Llewellyn and Cohen & Gresser argued that the Continental Casualty Co., also known as CNA, has breached its contractual obligation to pay Bankman-Fried’s defense costs “on a current basis, without regard to whether payments may exhaust the policy limit.”
According to the complaint, Bankman-Fried’s companies held a CNA policy as a second-layer excess policy offering “a $5 million limit of liability, which attaches upon exhaustion of the $10 million in aggregate limits of the underlying insurance.” The primary insurance policies and the first-layer excess policies have both been exhausted, according to the complaint, so Bankman-Fried is seeking reimbursement from CNA through the court after “numerous” requests for payment were unsuccessful.
The suit comes less than a year after FTX collapsed and filed for bankruptcy in November. Bankman-Fried was arrested in the Bahamas in December at the request of U.S. officials and agreed to come to the United States to face charges; he spent approximately eight months on house arrest at his parents’ home in California before he was remanded to Brooklyn’s Metropolitan Detention Center for allegedly attempting to tamper with witnesses.
While Bankman-Fried’s current criminal trial is expected to last approximately six weeks, the insurance suit noted that that case is not the full extent of his legal troubles. He is set to face another criminal trial for a group of severed charges in 2024 and is “further involved in more than a dozen civil and regulatory actions relating to FTX,” his attorneys noted.
His attorneys argued that CNA’s alleged breaches of the policy “have caused, and threaten to cause, substantial and irreparable harm” to Bankman-Fried, including the impairment of his defense. They argued that Bankman-Fried has already incurred more than $75,000 in monetary damages for his efforts to obtain CNA coverage and out-of-pocket defense costs. The suit seeks unspecified damages for CNA’s alleged breach of contract and alleged bad faith conduct, along with a declaration that CNA has a duty to pay Bankman-Fried’s defense costs “on an ongoing basis.”