FTX Sues Former Employees for Fraudulent Asset Transfers
FTX, a bankrupt cryptocurrency exchange, has filed a lawsuit against former employees of its Hong Kong affiliate, Salameda. The lawsuit alleges that the employees, including Michael Burgess, Kevin Nguyen, Darren Wong, and Matthew Burgess, along with two other FTX-related firms and Lesley Burgess, fraudulently transferred assets worth approximately $157.3 million prior to FTX’s bankruptcy proceedings.
The court filing states that during the 90-day period before FTX filed for Chapter 11 bankruptcy protection in November, the defendants withdrew digital assets and fiat currency from their FTX.com and FTX US accounts. The majority of these assets, valued at over $123 million, were withdrawn on or after November 7. Michael Burgess alone allegedly received over $73 million in fraudulent transfers.
The filing also claims that Matthew Burgess, an FTX Group employee at the time, enlisted other employees to facilitate the withdrawal requests from Michael Burgess’s FTX US exchange account while misrepresenting it as his own. Lesley Burgess, the mother of Michael and Matthew Burgess, successfully withdrew assets shortly before FTX.com halted withdrawals on November 8, 2022.
Additional Lawsuits Filed to Recover Funds
In addition to suing former employees, FTX has also filed a lawsuit against Joseph Bankman and Barbara Fried, parents of FTX founder Sam Bankman-Fried. The lawsuit alleges that Bankman and Fried exploited their access and influence within FTX to enrich themselves by millions of dollars through fraudulent transfers and misappropriation of funds.
The court filing reveals that Bankman directed more than $5.5 million in donations from FTX Group to Stanford University between November 2021 and May 2022. Stanford University has announced its intention to return these donations following the allegations against Bankman and Fried.
Hot Take: FTX Takes Legal Action Against Former Employees and Founders’ Parents
Bankrupt cryptocurrency exchange FTX has taken legal action to recover assets worth $157.3 million from former employees and the parents of its founder. The exchange alleges that the employees fraudulently transferred assets prior to FTX’s bankruptcy proceedings, with one employee receiving over $73 million in fraudulent transfers. Additionally, the founders’ parents are accused of exploiting their positions within FTX to enrich themselves through misappropriation of funds. These lawsuits highlight the challenges faced by cryptocurrency exchanges in maintaining financial integrity and transparency. As the crypto industry continues to evolve, it is crucial for exchanges to implement robust systems and processes to prevent fraudulent activities and protect investor interests.
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