Customers of FTX have filed a class action lawsuit seeking a determination that the company's holdings of digital assets belong to the customers against the bankrupt cryptocurrency exchange and its former top executives, including Sam Bankman-Fried.
The case is the most recent attempt to use the legal system to assert ownership over the diminishing assets of FTX, which is already at odds with liquidators in the Bahamas and Antigua as well as the bankruptcy estate of Blockfi, another defunct cryptocurrency business.
Customers rushed to remove their holdings from the Bahamas-based FTX, which was once the second-largest cryptocurrency exchange after concerns about its finances surfaced. As a result, the company halted withdrawals and declared bankruptcy last month.
Bankman-Fried is accused of participating in a "fraud of epic proportions" that included utilizing client funds to sustain his Alameda Research cryptocurrency trading platform, according to a federal prosecutor.
"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 complaint said.
Based on the U.S. lawsuit, FTX promised to separate consumer accounts but instead allowed them to be misused; as a result, customers should be compensated first. Delaware bankruptcy court. The complaint stated that class members of customers "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."
Although Bankman-Fried admitted that FTX had poor risk management, he insisted that he did not think he was criminally responsible. He was released last week on a $250 million bail with travel limitations despite the fact that he has not yet filed a plea.
Traceable client assets are not considered to be FTX property, according to the proposed class, which seeks to represent more than 1 million FTX consumers both domestically and abroad. The complaint states that the customer class wants the court to specifically rule that any property held at Alameda that may be linked back to customers is not Alameda property.
The question of whether deposits belong to the company or the consumers is complicated by the fact that crypto companies are not heavily regulated, frequently have operations outside of the United States, and do not offer the same level of deposit protection as U.S. banks and brokerages.
