Sequoia Capital, ‘Inspector Gadget’ creator hit by FTX class-action lawsuit 

https://www.theblock.co/post/214661/sequoia-capital-inspector-gadget-creator-hit-by-ftx-class-action-lawsuit?utm_source=rss&utm_medium=rss

Sequoia Capital, the creator of “Inspector Gadget,” Signature Bank and others linked to defunct crypto exchange FTX were slapped with a class action lawsuit this week, which alleges the defendants knew about the alleged fraud at the company and “did not care.” 

Connor O’Keefe, who has funds frozen on FTX, filed the lawsuit this week. He claims the parties named in the suit were aware of wrongdoing by former FTX CEO Sam Bankman-Fried, who is facing a litany of criminal charges in connection with his role at the exchange. 

Though FTX customers could not see that SBF was misappropriating their deposits on vice, vanity and speculative personal investments, defendants had full view,” the lawsuit said. “Through diligence on FTX and close ties with SBF, defendants learned that FTX was operated as SBF’s personal piggy bank, that as quickly as FTX customer funds flowed into FTX, they flowed back out to other entities SBF separately owned or controlled, and that FTX lacked the most basic internal controls, such that the enterprise was in fact a house of cards.”

“But defendants did not care. They, too, had money to make in the scheme, and their interests aligned with SBF’s,” the lawsuit said. 

The class-action suit was filed in U.S. District Court in the Miami division of the Southern District of Florida. More than a dozen parties were named in the lawsuit and include Silvergate Bank, Signature Bank, Deltec Bank and Trust Company Limited and Moonstone Bank, along with Jean Chalopin, who is the creator of the cartoon character “Inspector Gadget” and chairman of Deltec and Moonstone. The lawsuit also names venture capital firms Sequoia Capital Operations and Paradigm Operations. 

O’Keefe’s filing describes how Bankman-Fried allegedly used FTX customer funds to prop up his crypto trading firm, Alameda Research. There could be 2.7 million class action members in the U.S., O’Keefe claimed.

“The FTX fraud was straightforward and, though concealed from class members, the fraud was readily apparent to those, like defendants, with visibility into FTX’s operations,” the lawsuit said. “Had class members known of these material omissions, they would not have deposited funds into accounts on the FTX exchange, SBF’s fraud would not have succeeded, and neither SBF nor any of the defendants would have stood to profit as handsomely as they expected.”

The former CEO and majority shareholder of The Block has disclosed a series of loans from former FTX and Alameda founder Sam Bankman-Fried.

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