FTX clients file class action lawsuit to recover ‘diminished’ assets

Four FTX clients have filed a class action lawsuit against the company and Alameda Research in an attempt to recoup losses following the crypto exchange’s Chapter 11 bankruptcy filing last month.

The lawsuit filed Tuesday asked a Delaware bankruptcy court judge to declare that FTX’s remaining assets belong to customers rather than the company. Plaintiffs say they should be compensated for their losses before other creditors.

“Client Class Members should not have to line up with general secured or unsecured creditors in this bankruptcy proceeding just to share in the diminished real estate assets of FTX Group and Alameda,” the complaint states.

The lawsuit claimed that cash and other assets held by customers “never belonged to FTX or Alameda” and should not be used to pay off the platform’s many creditors. Scammed customers are seeking class action status on behalf of over one million FTX customers worldwide.

Disgraced FTX founder Sam Bankman-Fried faces eight federal charges of up to 115 years in prison. The feds allege Bankman-Fried defrauded clients out of billions of funds that were misappropriated for use by FTX executives and to cover losses at sister cryptocurrency trading company Alameda Research.

Bankman-Fried is currently under house arrest at his parents’ home after posting a record $250 million bond.

FTX is facing a class action lawsuit from a group of four clients.
AFP via Getty Images

The filing is one of many ongoing efforts to seek restitution following the FTX implosion. FTX CEO John Ray has signaled that the company will attempt to recover Bankman-Fried investments and contributions that used the company’s funds.

FTX’s new management team has accused Bankman-Fried and his allies of lavish spending, including amassing a luxury Bahamas real estate empire and large political contributions ahead of the 2022 midterm elections.

A separate court filing revealed Tuesday that Bankman-Fried and FTX co-founder Gary Wang borrowed $546 million from Alameda Research to buy an 8% stake in retail stock trading platform Robinhood. This participation is also linked to an ongoing bankruptcy procedure.

Sam Bankman Fried
Bankman-Fried is accused of defrauding FTX customers out of billions.
by Reuters

Wang and former Alameda Research CEO Caroline Ellison, Bankman-Fried’s former lover, each pleaded guilty to fraud charges last week. The two disgraced executives are cooperating with the Feds.

Prosecutors called Bankman-Fried’s alleged actions “one of the greatest financial frauds in American history.”

The fall of FTX further destabilized a cryptocurrency sector already reeling this year from the impact of deteriorating economic conditions and a months-long selloff. Solana, a cryptocurrency once backed by Bankman-Fried, fell more than 12% on Wednesday and lost 94% of its value this year, Bloomberg reported.

With post wires

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