FTX customers file a class-action lawsuit to recover assets that have been 'dwindled
Four customers of FTX have filed a class-action lawsuit against the company and Alameda Research. They seek to recover losses they incurred following FTX's Chapter 11 bankruptcy filing last month.
The lawsuit, which was filed in Delaware bankruptcy court, asks the judge to determine that the remaining assets of FTX should belong to the customers rather than the company. The plaintiffs argue that they should be compensated for their losses before other creditors.
According to the complaint, the cash and other assets held by the customers "never belonged to FTX or Alameda" and should not be used to pay off the platform's creditors. The plaintiffs are seeking class-action status on behalf of over one million FTX clients worldwide.
Sam Bankman-Fried, the founder of FTX, is facing eight federal charges that carry a potential prison sentence of up to 115 years. It is alleged that Bankman-Fried defrauded customers out of billions of dollars, which were then misused by FTX executives to cover losses at Alameda Research. Bankman-Fried is currently under house arrest at his parent's home after posting a $250 million bond.
There are several efforts underway to seek compensation following the collapse of FTX. The CEO of FTX, John Ray, has indicated that the company will try to recover investments and funds that were used by Bankman-Fried.
The new leadership team at FTX has accused Bankman-Fried and his allies of extravagant spending, including the acquisition of a luxury real estate empire in the Bahamas and making significant political contributions prior to the 2022 midterm elections.
Another court filing on Tuesday revealed that Bankman-Fried and Gary Wang, the co-founder of FTX, borrowed $546 million from Alameda Research to purchase an 8% stake in the retail stock trading platform Robinhood. This stake is also involved in ongoing bankruptcy proceedings.
Gary 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.