In a recent development, FTX, the cryptocurrency exchange platform, has taken legal action against former employees of its Hong Kong affiliate firm, Salameda, in an attempt to recover approximately $157 million. The lawsuit, which was filed in the U.S. Bankruptcy Court for the District of Delaware, alleges that these individuals and entities engaged in fraudulent asset withdrawals from FTX just days before the company filed for Chapter 11 bankruptcy in November 2022.
The defendants named in the lawsuit include Michael Burgess, Matthew Burgess, their mother Lesley Burgess, Kevin Nguyen, Darren Wong, and the companies 3Twelve Ventures and BDK Consulting. The court documents suggest that Salameda was under the control of Sam Bankman-Fried (SBF), the embattled crypto mogul. The lawsuit claims that these defendants, leveraging their connections within FTX, managed to bypass a lengthy queue of pending withdrawal requests, enabling them to extract millions in cryptocurrency assets from their FTX accounts.
Specifically, the lawsuit alleges that during the 90 days leading up to the bankruptcy filing on November 11, 2022, the defendants benefitted from these withdrawals, which are now being classified as preferential transfers. The court filing states, "Defendants had accounts on one or both exchanges," referring to FTX and FTX.US. It further alleges that these individuals used their insider connections to ensure they received preferential treatment over other customers. As a result, they were able to finalize transactions on November 8, 2022, just hours before FTX suspended withdrawals from its platform.
The total value of these questionable transfers is estimated to be around $157.3 million, with a significant portion, $123 million, being withdrawn on November 7. The lawsuit accuses the defendants of executing these transfers "with the intent to hinder, delay or defraud FTX US' present or future creditors."
Interestingly, this is not FTX's first attempt to reclaim funds from associated parties. In a separate legal action last week, FTX initiated a lawsuit against SBF's parents, Joseph Bankman and Barbara Fried, aiming to "recover millions of dollars in fraudulently transferred and misappropriated funds."
As the legal proceedings unfold, the cryptocurrency community will be keenly watching the outcome, given the significant sums involved and the high-profile nature of the individuals and entities implicated.
