As government agencies line up to sue FTX and its founder Sam Bankman-Fried, the group of former clients is scrambling to get their money back first. A class action lawsuit brought by four people demands priority access to the company’s frozen funds for its clients, not investors.
The lawsuit was filed on December 27 in the United States Bankruptcy Court for the District of Delaware. Four plaintiffs claim to represent the entire class of former FTX customers, which could number one million people. What the lawsuit seeks to obtain is priority rights to return digital assets held by FTX US or FTX.com to their customers.
The plaintiffs stress that the FTX User Agreement did not allow the platform to use client funds for its own purposes, including loans or their use for operating expenses. Any withdrawal of client funds from the accounts constituted a “impermissible mixing, misappropriation, misuse or conversion of customers’ property”, according to demand.
Therefore, any funds frozen by FTX and traceable to customer ownership may not be used to pay expenses, claims or non-customer creditors until customers are reimbursed, the claims state:
“Members of the client class should not have to wait alongside secured or general unsecured creditors in these bankruptcy proceedings just to share in the dwindling assets of the FTX Group and Alameda estate.”
The Department of Justice recently launched an investigation into the whereabouts of approximately $372 million in missing FTX digital assets. On November 12, in the midst of its bankruptcy and internal collapse, FTX warned clients of abnormal activity from their wallets regarding at least 228,523 Ether (ETH) transferred off the exchange by an unknown perpetrator.
Another dirty tactic was suspected when cryptocurrency wallets associated with the now-bankrupt Alameda Research trading firm, FTX’s sister company, began transferring funds just days after Bankman-Fried was released on bail for $250 million.
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