Status: 28.12.2022 9:28 am
Crypto exchange FTX filed for bankruptcy in November. After the billion-dollar scandal, the private customers of the insolvent platform are now trying to save their invested assets.
FTX clients seek a class action lawsuit against the bankrupt crypto exchange and its former executives to salvage their wealth. “Members of the customer group should not have to stand in line with secured or unsecured creditors in this bankruptcy proceeding just to participate in the diminished assets of FTX Group and Alameda,” said the complaint, filed yesterday in the US bankruptcy court in Delaware.
Dispute over existing assets
Insolvency administrators in the Bahamas and Antigua as well as administrators of the bankruptcy estate of Blockfi, another insolvent crypto company, are already fighting over the remaining assets of the bankrupt crypto exchange. FTX did not immediately respond to a request for comment.
The plaintiffs want to ensure that traceable customer assets are not included in the bankruptcy estate of either FTX or Almeda. However, if the court finds that customer funds are owned by crypto companies, retail customers will claim a priority right to repayment over other creditors.
Crypto companies are lightly regulated and are often based outside of the United States. Therefore, deposits are not guaranteed as with US banks and brokers. This raises the question of whether the company or the customers own the deposited funds.
Bankman-Fried has to live with his parents until the trial
The crypto exchange FTX, a company owned by entrepreneur Sam Bankman-Fried, collapsed in November after many customers lost confidence and wanted to withdraw funds on a large scale. However, the second largest trading platform for cryptocurrencies at times did not pay out billions in customer funds. For a long time, Bankman-Fried was considered an exception in the industry and was celebrated on the front pages of US business media such as “Fortune” just a few months ago.
However, after the FTX bankruptcy, the US Securities and Exchange Commission (SEC) charged the 30-year-old with fraud, accusing him of misleading investors with false promises and embezzling their funds to buy real estate for himself and his family. He was arrested in the Bahamas in December and extradited to the United States a few days later.
Bankman-Fried, who recently said he had just $100,000 left in his bank account, was released a few days ago on $250 million bail. The FTX founder has to live with his parents and wear an electronic ankle bracelet until the trial begins, during which he faces a life sentence.