FTX Customers Sue Sam Bankman-Fried and Co. in Latest Class Action

FTX Customers Sue Sam Bankman-Fried and Co. in Latest Class Action
FTX Customers Sue Sam Bankman-Fried

BERLIN (CoinChapter.com) — On Dec 27, former customers of FTX filed a lawsuit against the company and its former executives, including ex-CEO Sam Bankman-Fried (SBF). The suit aims to prioritize the exchange users when allocating the owed money. 

FTX and its former founders have been the target of various legal actions since the company’s filing for bankruptcy in November 2022. 

The exchange’s four clients initiated the latest litigation, claiming to represent all the customers (about 1 million individuals).

The lawsuit aims at prioritizing customers rather than investors in the line to access the company’s frozen funds. The claim is based on the FTX assertion of segregating customer accounts. Instead, they have misappropriated said funds, causing heavy losses to its clients worldwide. 

“Customer class members should not have to stand in line along with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished estate assets of the FTX Group and Alameda,” said the complaint.

The plaintiffs seek the court to declare all funds held in FTX Trading accounts for non-US clients and in FTX US accounts for US customers or any other traceable client accounts and assets are not FTX property. The same goes for Alameda Research traceable accounts.

However, if the court finds the said assets as properties of FTX and Alameda, plaintiffs seek “priority rights to repayment and recovery” over other creditors. 

Besides SBF as a defendant, the class action lawsuit also included the other FTX executives, like Nishad Singh, Zixiao Wang, and Caroline Ellison, CEO of Alameda’s former CEO.

As stated earlier, FTX filed for Chapter 11 bankruptcy in November following the collapse of the exchange.

Ex-CEO of Alameda Research, Caroline Ellison, pleaded guilty to seven charges, including conspiracy to commit wire fraud, money laundering, commodities fraud, and securities fraud, on Dec 22.  

Gary Wang, the co-founder of FTX, has also entered a plea deal with the Federal Government in the multi-billion dollar fraud allegedly orchestrated by SBF. 

Bahamas authorities arrested SBF on Dec 13 and filed eight fraud charges against him. They later extradited the ex-billionaire entrepreneur to New York. However, the US court granted SBF bail on a $250 million bond, ordering him to be in his parent’s custody before trial.  

As reported earlier, FTX hid about $8 billion in Alameda’s liabilities in a secret account he called “our Korean friend’s account.”

FTX allegedly owes its customers over $3 billion in liabilities to 50 unsecured creditors. However, how much of this huge debt belongs to the clients alone is still open.

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