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SBF’s Brother Wanted to Buy Island Nation of Nauru With FTX Funds

3 mins
Updated by Michael Washburn
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In Brief

  • The FTX bankruptcy estate is pursuing legal action through myriad channels to recover funds from the failed exchange.
  • Gabe Bankman-Fried, the brother of FTX's founder, reportedly wanted to use the FTX Foundation's funds to buy the island of Nauru.
  • Once a wealthy phosphate exporter, Nauru has faced severe economic difficulties since the 1990s, when its reserves ran dry.
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Have you ever been so rich you thought of buying a country? Probably not. But the brother of disgraced FTX founder, Sam Bankman-Fried, reportedly was, a new lawsuit claims.

According to the lawsuit by the FTX bankruptcy estate, which seeks to recover hundreds of millions from the ruins of FTX, Sam Bankman-Fried’s brother Gabe at one time wanted to use the FTX Foundation’s funds to buy the Pacific island nation of Nauru. The FTX Foundation was a non-profit funded by FTX itself, and served as Bankman-Fried’s philanthropic arm. 

FTX Foundation Was Allegedly a Shallow PR Stunt

The bankruptcy estate alleges that the Foundation was little more than a giant PR campaign for the company’s executives.

On Thursday, the FTX estate, led by former Enron bankruptcy steward John Ray III, filed its latest claim in a Delaware bankruptcy court. The claim sets forth 48 counts related to the fraudulent transfer of funds by former FTX executives, including Bankman-Fried, CTO Gary Wang, and Alameda CEO Caroline Ellison.

Learn more about the spectacular imposion of FTX: FTX Collapse Explained: How Sam Bankman-Fried’s Empire Fell

The lawsuit includes old accusations about the executives using FTX’s profits. It also claims that Bankman-Fried is using customer money to pay for his defense. Additionally, the lawsuit contains new revelations about FTX’s alleged extravagant spending.

For those who have followed the FTX downfall and its aftermath, many of these claims sound familiar. But perhaps the most alarming has to do with Gabe Bankman-Fried’s plans to purchase Nauru. A country of only 21 square kilometers.

Gabe, who is three years Sam’s junior, wanted the tiny and remote island to use as a shelter for effective altruists (EA) in the event that “50%-99.99% of people die.”

Sam Bankman-Fried and his brother were both members of the EA community. A much-lambasted group that purports to seek to use reason and logic for the greater public good.

The rise of anti-money laundering software has helped put shadow banks, like those domiciled on Nauru early in the millennium, out of business. Source: Statista

Nauru Is Tiny and Broke

Gabe also dreamed of building a lab to push the boundaries of human genetic advancement. Strangely, the memo includes the comment that “probably there are other things it’s useful to do with a sovereign country, too.” 

But Nauru is not just any remote island. The fluctuating fortunes of Nauru, since it gained independence from Australia in 1968, have evoked interest and sympathy out of all proportion to its size.

For a time, Nauru had one of the highest per capita incomes in the world. But Nauru has been in severe economic difficulty since its phosphate reserves virtually ran out in the 1990s. With nothing left to export and no other natural resources, the island has been desperate for cash.

At the turn of the millennium, the island was on the Financial Action Task Force’s blacklist as a haven for money laundering. Shadow banks, with no physical presence, registered on Nauru and set about laundering enormous amounts of money, as New York Times journalist Jack Hitt detailed in a lengtly feature, “The Billion-Dollar Shack.”

At present, the island is infamous for hosting an Australian offshore refugee detention center. Both Nauru and Australia have come under fire for detaining individuals assessed as authentic refugees. Not to mention for the conditions in the detention center. Myriad human rights abuses reportedly occured there over the years.

For now, Sam Bankman-Fried has plenty of worries of his own. He awaits the start of his criminal trial in the Southern District of New York. It is due to begin in October. He has pleaded not guilty to all charges against him.

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Josh Adams
Josh is a reporter at BeInCrypto. He first worked as a journalist over a decade ago, initially covering music before moving into politics and current affairs. Josh first owned Bitcoin in 2014 and has followed the space ever since. He is particularly interested in Web3 adoption, policy and regulation, CBDCs, privacy, and the future of the metaverse.