FTX lawsuit says burned users shouldn’t have to line up with other creditors

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A consortium of FTX customers has filed a class action lawsuit against the failure of the exchange, seeking to confirm that the company’s crypto holdings belong to the customers.

The filing said members of the client class should not have to queue with other creditors seeking to share the remaining assets of FTX Group and Alameda Research and that those assets should be reserved for clients only.

The lawsuit seeks a declaration that client traceable assets are not owned by FTX, including assets held by Alameda that are still traceable to clients.

Additionally, the suit alleged that FTX failed to segregate and misappropriate customer accounts, despite its undertaking to do so, and therefore those customers should be reimbursed first.

If the court instead determines that these customer assets are, in fact, the property of FTX, then the lawsuit will seek to ensure that customers are always paid first, before other FTX creditors.

The FTX collapse may have affected more than 1.2 million customers in the United States alone, based on the number of users reported by the companies.

FTX and Alameda lawsuits pile up

These consumers aren’t the only ones trying to recover leftover funds from the bankrupt FTX. Corporations, including defunct crypto lender BlockFi, are also lining up.

In late November, a court found that FTX and Alameda Research both owed BlockFi more than $1 billion, including $671 million on a now defaulted loan to Alameda and $355 million in frozen funds on the exchange. company cryptography.

A November court filing revealed the exchange owed about $3.1 billion to its top 50 external creditors, many of which are still unknown.

The recent news comes after US District Judge Lewis Kaplan replaced Ronnie Abrams as the judge overseeing Sam Bankman-Fried’s criminal trial.

The judge, who previously worked on the first federal Bitcoin securities fraud prosecution, previously represented Prince Andrew, Duke of York, and will oversee the eight criminal charges now facing Bankman-Fried.

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