FTX Customers File Class Action Against Defunct Exchange, Top Execs: Report

FTX and some of its former top leadership including have been slapped with a class action lawsuit by customers on December 28, according to the latest Reuters report.

The customers have sought a declaration that FTX’s holdings are not the company’s property. The same goes for the traceable customer assets held at Alameda.

• The lawsuit, which was filed in the US Bankruptcy Court in Delaware, mentioned that the now-defunct crypto exchange “pledged to segregate customer accounts” and rather enabled them to be “misappropriated” while adding that customers should be repaid first.

The complaint read,

“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.”

• The lawsuit wants to represent over 1 million FTX customers in the United States and abroad.
• It also seeks a declaration from the court that funds held in the accounts of the crypto exchange’s US affiliate – FTX.US – as well as in FTX Trading accounts or other traceable customer assets are not the firm’s property.
• If the court does come to a conclusion that the said property belongs to FTX, then the customers seek a ruling which prioritizes them before payment to the creditors.
• Last month, FTX halted withdrawals and filed for bankruptcy after its hole in the balance sheet was revealed.
• Bankman-Fried was arrested in the Bahamas. SBF, who had stepped down from his role following the collapse, was charged with wire fraud, securities fraud, money laundering, etc.
• He has since been extradited to the US and released from jail on a $250 million bond.