- FTX files $157 million lawsuit against former Salameda employees.
- Allegations of fraudulent asset withdrawals before FTX’s bankruptcy.
- FTX’s persistent efforts in debt recovery and legal battles.
In a recent legal development, FTX, the cryptocurrency exchange facing bankruptcy, has initiated a lawsuit against former employees associated with Salameda, an entity linked to FTX, headquartered in Hong Kong. The objective is to recover approximately $157.3 million.
This Hong Kong-based company was under the control of Sam Bankman-Fried, the former CEO and founder of FTX, who is currently in custody pending trial.
The former employees are accused of being involved in illicitly withdrawing assets from FTX shortly before the exchange filed for bankruptcy in November 2022.
The lawsuit targets individuals like Michael Burgess, Matthew Burgess, Lesley Burgess (their mother), Kevin Nguyen, Darren Wong, and two companies—3Twelve Ventures and BDK Consulting. These entities allegedly collaborated in the wrongful withdrawal of assets from both FTX.com and FTX.us before the bankruptcy filing. These withdrawals, occurring three months before the bankruptcy, were designed to provide preferential treatment to certain customers, actions that are subject to legal scrutiny under the Bankruptcy Code.
According to the legal filing, these accused individuals had close connections with some FTX staff members, which they leveraged to ensure they could withdraw their funds before other customers. Their combined withdrawals amount to more than $123 million of the total $157.3 million.
The lawsuit asserts that these withdrawals were executed with the intention to obstruct or deceive FTX US’s current or future creditors.
FTX’s Ongoing Recovery Efforts
FTX has been actively pursuing the recovery of debts owed by various affiliated parties. This isn’t the first time they’ve undertaken such efforts.
In June, the company revealed a substantial debt of $8.7 billion to its customers but managed to recover $7 billion in liquid assets during the same period. FTX also brought a case before the Wilmington, Delaware bankruptcy court, seeking the return of $700 million that its founder, Sam Bankman-Fried, had transferred to K5 entities in 2022.
FTX alleged that Bankman-Fried, after attending an event hosted by Michael Kives, a co-owner of K5 Global, became an extravagant contributor, channeling millions to K5 Global and its affiliated entities.
FTX has not limited its actions to its founder and former CEO, Sam Bankman-Fried, but has also targeted his executives, parents, and even divisions like FTX’s philanthropic and life science sectors.
In a more recent development, FTX made accusations against the parents of FTX’s founder, Joseph Bankman, and Barbara Fried, both law professors at Stanford Law School, suggesting that they used their legal expertise to divert funds.
Additionally, in September, the now-insolvent cryptocurrency exchange obtained court approval to liquidate, invest, and hedge cryptocurrency holdings worth $3.4 billion to settle its outstanding debts. Notably, FTX’s largest crypto holding is $1.16 billion worth of Solana (SOL) tokens, followed by Bitcoin (BTC) at $560 million and Ether (ETH) at $196 million, as of August 31st.
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