Several former customers of the FTX crypto broker are suing the company in an attempt to recover lost funds. The grounds of the lawsuit are financial misconduct and breach of agreement. The plaintiffs claim that the money they entrusted to FTX was handled against the terms of service.
The charge brought against the defendants – FTX cofounders Sam Bankman-Fried and Gary Wang and CEO of Alameda Research Caroline Ellison – is that the money plaintiffs placed in the care of FTX was moved to Alameda accounts without their knowledge or consent.
It marks a severe breach of the client agreement, and is illegal according to federal law. Bankman-Fried was arrested in the Bahamas earlier this month on similar charges, whereas FTX filed for insolvency last month. In this situation, it’s expected that the deliberations on the financial repayment to FTX victims will soon commence.
The plaintiffs are all former clients who were unable to withdraw money from the platform before it went bankrupt. Before this happened, over $5 billion was withdrawn from the website in a single day. The reason for this was the rising concern regarding the state of the company and rumors of financial distress.
The goal of the plaintiffs is to achieve repayment of their funds, which are still technically held by FTX. In reality, the company doesn’t have them, although it’s estimated that a portion of repayments will be funded by the liquidation of FTX assets. Exactly how much will be covered is unknown.
Bankman-Fried has already been extradited to US, where he currently awaits trial. The exact charges are various types of fraud, to which the man has already admitted in a podcast earlier this month. This should make the trial faster and simpler than it would’ve been otherwise.
It’s possible that the decision of the court will facilitate the repayment of all funds currently trapped within FTX, which would make the additional lawsuit unnecessary. At the moment, however, nothing is certain, and the plaintiffs plan to move forward with the second lawsuit if the first trial is unsuccessful.
The new CEO, John J. Ray III, has taken over to manage the company’s bankruptcy. According to him, the FTX management has been one of the worst cases of misconduct and mismanagement the worst he witnessed in his last forty years.