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FTX sues ex-employees to reclaim $157 million. Details inside…

2min Read

FTX accused its former employees of fraudulent asset withdrawals during the company’s financial turmoil.

FTX case

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  • Defunct crypto exchange FTX sues ex-employees.  
  • Additionally, the filing alleged that the defendants swiftly withdrew assets in that period.

FTX [FTT] has taken legal action against former employees of Salameda, an affiliated Hong Kong-based entity. This was done in an attempt to recover approximately $157.3 million, as disclosed in a court filing on Thursday (21 September).

The lawsuit specifically targets individuals including Michael Burgess, Matthew Burgess, Lesley Burgess (their mother), Kevin Nguyen, Darren Wong, and two companies owned or controlled by them. These entities had accounts registered at both FTX.com and FTX US. The lawsuit alleged fraudulent asset withdrawals in the lead-up to FTX’s bankruptcy.

The defendants allegedly benefited from preferential transfers during what is known as the Preference Period. This period spanned the 90 days leading up to FTX’s bankruptcy filing in November 2022. Additionally, the filing also state that the defendants swiftly withdrew assets and leveraged their connections within FTX to secure a priority position over other customers.

Legal action against former employees

This lawsuit represented another effort by FTX’s bankruptcy estate to recoup payments from affiliated parties. Prior targets included Sam Bankman-Fried, the former CEO, as well as his executives, and family members. Various arms of FTX, such as philanthropic and life science divisions were also included.

Furthermore, the estate also attempted to recover payments made to Genesis Global Capital, which was also undergoing bankruptcy proceedings. In January, reports indicated that FTX had successfully recovered over $5 billion in various assets. In June, the bankruptcy team disclosed that the company owed its customers a staggering $8.7 billion.

The court filing further cited messages from the communication app Slack. It alleged that Matthew Burgess enlisted the help of other FTX employees to expedite certain pending withdrawal requests from one of Michael Burgess’ FTX US exchange accounts while misrepresenting the account as his own.

The bulk of the transfers occurred on or after 7 November. The total amounted to more than $123 million out of the total $157.3 million,

Sam Bankman-Fried currently remains in custody as he prepares for his trial, scheduled to commence on 3 October. Recently, an appeals court denied his request for release from jail before the trial’s commencement.

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Saman Waris works as a News Editor at AMBCrypto. She has always been fascinated by how the tides of finance and technology shape communities across demographics. Cryptocurrencies are of particular interest to Saman, with much of her writing centered around understanding how ideas like Momentum and Greater Fool theories apply to altcoins, specifically, memecoins. A graduate in history, Saman worked the sports beat before diving into crypto. Prior to joining AMBCrypto 2 years ago, Saman was a News Editor at Sportskeeda. This was preceded by her stint as Editor-in-Chief at EssentiallySports.
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