FTX customers filed a class action lawsuit against the failed exchange and its 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 a attempt to claim the dwindled 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 allowed them to be misappropriated and customers should be repaid first, according to a lawsuit filed in the U.S. Bankruptcy Court in Delaware.
The complaint said that 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.
Bahamas-based FTX stopped a month of withdrawals and filed for bankruptcy after customers rushed to withdraw their holdings from the second-largest criptocurrency exchange after questions surfaced about its finances.
Sam Bankman- Fried faces charges stemming from a federal prosecutor's investigation of a fraud of epic proportions that included allegedly using customer funds to support his Alameda Research trading platform.
Sam Bankman- Fried does not believe he has criminal liability, despite acknowledging risk-management failures at FTX. He has not yet entered a plea and was released on a $250 million bond last week that included restrictions on his travel.
A 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. According to the complaint, the customer class wants the court to find that the property held at Alameda that is traceable to customers is not Alameda property.
The lawsuit seeks to make 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 that the property held at Alameda that is traceable to customers is not Alameda property, according to the complaint.
If the court determines that it is FTX property, then the customers can seek a ruling that they have a priority over other creditors.
Deposits are not guaranteed as U.S. bank and brokerage deposits are not guaranteed, complicating the question of whether the company or customers own the deposits.