FTX customers filed a class action lawsuit against the failed exchange and former top executives, including Sam Bankman- Fried, on Tuesday, seeking a declaration that the company's holdings of digital assets belong to customers.
The lawsuit is the latest legal effort to claim the dwindling assets of FTX, which is already feuding with liquidators in the Bahamas and Antigua and the bankruptcy of Blockfi, another failed criptocurrency company.
FTX promised to segregate customer accounts and allow them to be misappropriated and customers should be repaid first, according to the lawsuit filed in the U.S. Bankruptcy Court in Delaware.
Customer class members should not have to stand in line with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished assets of the FTX GroupFTX Group and Alameda, said the complaint.
Bahamas-based FTX stopped withdrawing last month and filed for bankruptcy after customers rushed to pull their holdings from what was once the second largest criptocurrency exchange after questions surfaced about its finances.
Sam Bankman- Fried is accused of being involved in a fraud of epic proportions that included allegedly using customer funds to support his Alameda Research trading platform.
Sam Bankman- Fried said he does not believe he has criminal liability, despite acknowledging risk-management failures at FTX. He has not entered a plea yet and was released on a $250 million bond last week that included restrictions on his travel.
The proposed class, which wants to represent more than 1 million FTX customers in the United States and abroad, wants to make a declaration that customer assets are not FTX property. The customer class wants the court to find that the property held at Alameda that is traceable to customers is not Alameda property, according to the complaint.
The suit seeks a declaration from the court that funds held in FTX U.S. accounts for U.S. customers and FTX Trading accounts for non-U. S. customers or other traceable customer assets are not FTX property. The customer class wants the court to find out that the property held in Alameda that is traceable to customers is not Alameda property, according to the complaint.
If the court determines it is FTX property, the customers seek a ruling that they have a priority over other creditors.
Deposits are not guaranteed as U.S. bank or brokerage deposits are subject to the question of whether the company or customers own the deposits, as well as lightly regulated and often based outside the United States.