As final preparations were underway for Sam Bankman-Fried's trial in Manhattan, lawyers for the embattled former FTX CEO were filing a lawsuit against insurance company Continental Casualty in the Northern District Court of California. That company has allegedly provided Paper Bird and its subsidiary FTX Trading with directors and officers (D&O) insurance. The lawsuit was filed by Bankman-Fried as an individual.
The lawsuit claimed that Continental Casualty is the provider of โPaper Bird's second layer excess policy in the D&O insurance tower.โ D&O insurance protects a company's directors and officers from personal loss in the event of a lawsuit against them. Such coverage can be organized into a metaphorical tower of policies, where a policy at a given level comes into effect when the policy below it reaches its limit.
According to the lawsuit, the primary layer of D&O coverage provided $10 million for Bankman-Fried's defense from two insurers, and Continental Casualty's policy was intended to provide $5 million. The policy required that payments be made up to date. It covered the cost of defending against criminal charges, although there was an exclusion for โfraudulent, criminal and similar acts.โ There was no recovery provision in the policy.
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Costume noted that Paper Bird's two main D&O policy providers, Beazley and QBE, paid its defense costs in accordance with the terms of the policy. Bankman-Fried demands that Continental Casualty pay its defense costs in accordance with its contractual obligations, as well as compensation for damages, including legal costs.
The third layer of Paper Bird's D&O tower, provided by Hiscox Syndicates, is also the subject of court action. Hiscox has filed a lawsuit filed against Paper Bird and a long list of policyholders, including Bankman-Fried. An interposition action forces the parties in a legal proceeding to litigate their claims against each other.
According to that complaint, archived On August 9 in Northern California District Court, the Hiscox policy takes effect after $15 million in underlying coverage. The lawsuit claimed that Hiscox expected claims to be made under its policy for $5 million in coverage, and the interpellation was necessary to ensure the fair disbursement of policy funds.
Twenty people were named in the Hiscox complaint. All were described as having connections to FTX, sometimes by title (department head).
According to The Financial Times, Paper Bird was the full owner of FTX Ventures and owned 89% of FTX Trading. The newspaper described FTX Trading as "the founding company identified in the FTX legal notices." Paper Bird was wholly owned by Bankman-Fried.
fried banker sought to collect D&O insurance payments under a policy issued to West Realm Shires, which is more commonly known as FTX US. that effort was rejected by FTX lawyers and the committee of creditors and blocked by the US Bankruptcy Court for the District of Delaware.
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