FTX recovered over $5 billion in assets but owes $8.7 billion to customers.
Former FTX CEO Sam Bankman-Fried remains incarcerated ahead of an October trial.
In a dramatic turn of events, the beleaguered cryptocurrency exchange FTX has initiated a lawsuit against former employees of Alameda, an entity associated with FTX, seeking the recovery of approximately $157.3 million. This legal action comes as FTX grapples with the aftermath of its bankruptcy filing in November 2022. It alleges that a group of individuals, including Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, Darren Wong, and two affiliated companies, engaged in fraudulent asset withdrawals in the days leading up to FTX’s insolvency.
Sources reveal that during the 90-day period preceding FTX’s bankruptcy filing, referred to as the Preference Period, the defendants purportedly received preferential transfers. It was deemed recoverable under the Bankruptcy Code.
The court filing additionally alleges that Matthew Burgess engaged FTX employees to manipulate pending withdrawal requests from Michael Burgess’ FTX US exchange account. This manipulation, reportedly aided by deceptive claims about ownership, culminated in transfers worth more than $123 million. It was executed just hours before FTX suspended withdrawals on November 8, 2022. The lawsuit contends that these transfers were conducted with the intent to hinder, delay, or defraud FTX US’ creditors.
Analyzing FTX Case
This legal action is not the first attempt by FTX’s bankruptcy estate to recoup funds from related entities. Previously, they pursued claims against former CEO Sam Bankman-Fried, his executives, and his parents. And even FTX’s philanthropic and life science arms
Furthermore, efforts are underway to reclaim payments made to Genesis Global Capital. It is owned by Digital Currency Group, the parent company of CoinDesk, and is also facing insolvency.
Remarkably, in January, bankruptcy attorneys claimed that FTX had successfully recovered over $5 billion in various assets. Subsequently, in June, the bankruptcy team disclosed that the company owed its customers a staggering $8.7 billion.
It’s worth noting that Sam Bankman-Fried, FTX’s former CEO, is currently incarcerated. He is preparing for his trial, scheduled to commence on October 3. An appeals court recently rejected his bid for release before the trial’s commencement.