In a dramatic turn of events, the bankrupt cryptocurrency exchange FTX has filed a lawsuit against its founder, Sam Bankman-Fried, and three other former executives, seeking $1 billion in damages. The lawsuit alleges that the defendants engaged in a series of illicit transactions that should be reversed under U.S. bankruptcy law. The move is seen as an attempt to recoup assets for creditors, including thousands of customers who lost access to their funds when FTX suspended withdrawals last year.

The lawsuit comes after FTX's collapse in November, followed by Bankman-Fried's arrest in the Bahamas over allegations of customer fund theft. He was later extradited to the U.S., where he pleaded not guilty to charges of fraud, conspiracy to violate campaign finance laws, and bribery of Chinese authorities. The executive team, led by restructuring expert John Ray, initiated the lawsuit, targeting a series of share awards, property purchases, cash transfers, and other transactions.

The lawsuit also names Gary Wang, FTX's co-founder and former chief technology officer, as a defendant. Nishad Singh, the former director of engineering, and Caroline Ellison, a former chief executive of Alameda Research, a key FTX unit started by Bankman-Fried, are also named in the complaint. Last year, Ellison, Wang, and Singh pleaded guilty to charges including fraud in criminal cases related to FTX's collapse, unrelated to the new lawsuit.

In a separate development, FTX's lawyers have accused Bankman-Fried of financing his criminal defense with $10 million in misappropriated funds. The lawsuit alleges that much of this money was routed from FTX to Bankman-Fried's Morgan Stanley and TD Ameritrade accounts around January 2022. These funds are now reportedly being used to pay for Bankman-Fried's criminal defense bills.

The lawsuit and the criminal charges against Bankman-Fried mark a significant fall from grace for the founder of the once $32 billion-valued exchange. The company's rapid collapse, following liquidity issues and an inability to meet customer withdrawal demands, has left a trail of financial devastation and legal battles. As the lawsuit progresses, the focus will be on recovering as much money as possible for FTX's creditors.