FTX Files Lawsuit Against Former Employees Over $157 Million Fraud
Crypto exchange FTX has taken legal action against former employees of its Hong Kong affiliate, Salameda, in an effort to recover more than $157 million that was fraudulently taken. The defendants, Kevin Nguyen, Darren Wong, Michael Burgess, and Matthew Burgess, used their connections with FTX employees to bypass pending withdrawal requests and retrieve millions in crypto assets before the exchange declared bankruptcy.
Background: FTX’s Lawsuit Against Ex-Employees
The individuals named in the lawsuit held senior positions at FTX and Alameda Research while employed by Salameda. After leaving FTX, they established businesses involved in crypto trading on FTX.com and FTX.US exchanges. These businesses, including 3Twelve and BDK, were registered under their names and conducted high-volume trading activities ranging from $100 million to $400 million from January to November 2022.
Profits and Prioritization
The defendants profited significantly from handling FTX’s crypto trades. Prior to the exchange’s bankruptcy filing, Wong received over $70 million from selling the FTX Token (FTT). When news of FTX’s insolvency spread, the defendants hurriedly withdrew their assets along with thousands of other customers. Leveraging their relationships with FTX employees, they were given priority over other customers as the backlog of withdrawal requests grew.
Unlawful Transfers and Claim Disallowance
Matthew misrepresented Michael’s accounts as his own and expedited the withdrawal process. Additionally, Matthew pushed for withdrawals from accounts registered under his and Michael’s mother’s name to be prioritized. In total, the defendants managed to withdraw $157.3 million worth of crypto assets before FTX halted withdrawals on November 8. The plaintiffs are seeking to recover these assets, disallow any claims held by the defendants until the funds are returned, and request attorney’s fees, pre- and post-judgment interests, and the costs of the lawsuit.
Hot Take: FTX Fights Back Against Fraudulent Actions
FTX’s lawsuit against its former employees highlights the exchange’s determination to recover the funds unlawfully taken from its accounts. By taking legal action and seeking compensation, FTX aims to hold those responsible accountable for their actions. This case serves as a reminder that fraudulent activities in the crypto industry will not go unpunished, as exchanges and institutions take steps to protect their assets and maintain trust within the market.
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