A group of customers has gotten together to sue the now-insolvent FTX crypto exchange in order to be able to recover their funds.
The class action lawsuit that was recently filed in Delaware as part of the bankruptcy case is looking for a ruling from the court to recognize that ownership of the assets they had deposited on the platform belongs to them and not to the defunct exchange.
The lawsuit
On Tuesday, a total of four customers filed the lawsuit against FTX as well as its former executives, which include ex-CEO and co-founder Sam Bankman-Fried (SBF).
They have asked the court to declare that the crypto holdings deposited on the platform belong to its customers and not to the company or any of its creditors.
According to reports, the group has also asked that their case be declared as a class action lawsuit as part of the bankruptcy case in Delaware.
On November 11th, FTX, which is registered in the Bahamas, had filed for bankruptcy protection, as investors and traders rushed to the platform for withdrawing their funds.
There have been a number of legal efforts made for claiming the FTX assets, but the company’s new management has declared that customers will be the first ones to get repaid.
The complaint
In the latest complaint, customers have insisted that they should not have to stand in line in these bankruptcy proceedings with general unsecured and secured creditors, only to receive a small share of the assets of Alameda and FTX Group.
Bankman-Fried resigned from the FTX crypto exchange and has been extradited from the Bahamas to the US to face eight criminal charges that are related to fraud and more.
One of the charges brought against SBF is that he used customer deposits, made both in crypto and fiat, for supporting Alameda Research, the trading desk that he had also founded.
SBF’s Ex
Other than the co-founder, the customers have also sued ex-CEO of Alameda Research and SBF’s ex-girlfriend Caroline Ellison.
According to the customers, both of them need to be held accountable for breaching their fiduciary duty and for using customer holdings.
Ellison has already pled guilty to charges of fraud. She admitted in her testimony that Alameda Research used a special borrowing facility, which gave it access to customer funds deposited on FTX.
The proposed class action lawsuit has demanded that the court earmark the assets and cash that can be traced to customers for them alone because it did not belong to FTX or Alameda, or to any of the other creditors of the companies.
The lawsuit aims to represent about 1 million customers of FTX in the US and other parts of the world.
Should the court decide that FTX owns the holdings, then the customers want the judge to give them priority over other customers in terms of repayment.
In other news, the US Justice Department is also investigating a cyberattack that allegedly resulted in losses of $370 million on FTX, only hours after it filed for bankruptcy.
