The defendants took advantage of their relationships with FTX employees and were prioritized over other customers before the exchange halted withdrawals.
Bankrupt crypto exchange FTX has filed a lawsuit against the former employees of its Hong Kong affiliate Salameda, seeking to recover more than $157 million fraudulently taken by them.
According to a filing with the United States Bankruptcy Court for the District of Delaware, the defendants leveraged their connections to FTX employees and skipped a long line of pending withdrawal requests to retrieve millions in crypto assets from their accounts before the exchange filed for bankruptcy in November.
FTX Sues Ex-Employees of Hong Kong Affiliate
Kevin Nguyen, Darren Wong, Michael Burgess, and Matthew Burgess were formally employed by Salameda and held senior-level roles at FTX and Alameda Research. When Michael Burgess, Nguyen, and Wong left their positions at FTX by January 2022, they established several businesses that handled crypto trading on the FTX.com and FTX.US exchanges.
The plaintiffs said Michael, Nguyen, and Wong either jointly or individually controlled several companies, including 3Twelve and BDK, with accounts on FTX.com and FTX.US registered in their names. They engaged in activities that averaged between $100 million and $400 million in trading volume from January to November 2022.
The defendants made huge profits from handling FTX’s crypto trades. Before the exchange went bankrupt, Wong received over $70 million from selling the FTX Token, FTT.
When the news of FTX’s insolvency was making the rounds, Michael, Nguyen, and Wong scrambled with thousands of the exchange’s customers to withdraw their assets. While the backlog of pending customer withdrawal requests grew, the defendants took advantage of their relationships with FTX employees and were prioritized over other customers.
Matthew, who was still an FTX employee then, misrepresented Michael’s accounts as his and fastened the withdrawal process.
Request to Disallow Defendants’ Claims
Matthew also pushed for accounts registered in the name of Lesley Burgess – his and Michael’s mother – to be prioritized above others. They were able to withdraw crypto assets worth $157.3 million before FTX halted withdrawals on November 8.
The plaintiffs seek to recover the assets preferentially transferred to the defendants and to disallow any claims held by them until they relinquish the funds. FTX also wants to receive their attorney’s fees, pre- and post-judgment interests, and the costs of the lawsuit.