Sunday, May 19, 2024
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Customers of failed cryptocurrency exchange FTX have filed a class action lawsuit against the company and its former executives, including Sam Bankman-Fried, in an effort to claim FTX’s remaining digital assets. The suit, filed in the US Bankruptcy Court in Delaware, alleges that FTX promised to segregate customer accounts but instead allowed them to be misused. As a result, the complaint states that customers should be repaid before other creditors in the ongoing bankruptcy proceedings.

FTX, based in the Bahamas, filed for bankruptcy last month after a rush of customers tried to withdraw their funds following questions about the company’s financial stability. Bankman-Fried has been charged with fraud in connection to the allegedly misused customer funds, which were allegedly used to support his Alameda Research crypto trading platform. Bankman-Fried has admitted to risk management failures at FTX but denies criminal liability.

The proposed class action, representing over one million FTX customers in the US and abroad, seeks a declaration that customer assets are not the property of FTX or Alameda. If the court determines that the assets are the property of FTX, the customers seek a ruling granting them priority repayment over other creditors.

Cryptocurrency companies are often lightly regulated and based outside the US, and deposits are not guaranteed as they are at traditional banks and brokerages. This can complicate the question of ownership of deposits, particularly in the case of a company like FTX going bankrupt. The lawsuit is the latest legal battle for the remaining assets of FTX, which is also facing off with liquidators in the Bahamas and Antigua, as well as the bankruptcy estate of Blockfi, another failed crypto company. FTX has not yet commented on the lawsuit.

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