Four FTX customers filed a class-action lawsuit against the company and Alameda Research in an attempt to recoup losses following the crypto exchange’s Chapter 11 bankruptcy filing last month.
The lawsuit filed Tuesday petitioned a judge in Delaware bankruptcy court to rule that remaining FTX assets belong to customers instead of the company. The plaintiffs say they should be compensated for their losses before other creditors.
“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.
The lawsuit asserted that cash and other assets held by customers “never belonged to FTX or Alameda” and should not be used to repay the platform’s many creditors. The fleeced customers are seeking class action status on behalf of more than one million FTX clients around the world.
Disgraced FTX founder Sam Bankman-Fried faces eight federal charges carrying up to 115 years in prison. The feds allege that Bankman-Fried bilked customers out of billions in funds that were misappropriated for use by FTX executives and to cover losses at the sister cryptocurrency trading firm Alameda Research.
Bankman-Fried is currently under house arrest at his parent’s home after posting a record $250 million bond.
The filing is one of several efforts underway to seek restitution following FTX’s implosion. FTX CEO John Ray has signaled the company will attempt to claw back Bankman-Fried’s investments and contributions that used company funds.
FTX’s new leadership team have accused Bankman-Fried and his allies of lavish spending, including the accumulation of a luxury real estate empire in the Bahamas and significant political contributions ahead of the 2022 midterm elections.
A separate court filing Tuesday revealed Bankman-Fried and FTX co-founder Gary Wang borrowed $546 million from Alameda Research to buy an 8% stake in the retail stock trading platform Robinhood. That stake is also tied up in ongoing bankruptcy proceedings.
Wang and ex-Alameda Research CEO Caroline Ellison, Bankman-Fried’s former lover, each plead guilty to fraud charges last week. Both disgraced executives are cooperating with the feds.
Prosecutors have referred to Bankman-Fried’s alleged actions as “one of the biggest financial frauds in American history.”
FTX’s downfall has further destabilized a cryptocurrency sector already reeling this year from the impact of worsening economic conditions and a months-long selloff. Solana, a cryptocurrency once backed by Bankman-Fried, was down more than 12% on Wednesday and has lost a whopping 94% of its value this year, Bloomberg reported.
With Post wires