Bankrupt FTX Exchange Files Lawsuit Against Former Employees
Bankrupt crypto exchange FTX has filed a lawsuit against four former employees of Salameda, a Hong Kong-based affiliate believed to have been under the direct control of the crypto exchange’s former CEO, Sam Bankman-Fried. The individuals named in the lawsuit are Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, and Darren Wong.
Alleged Exploitation of Personal Ties for Priority Withdrawals
The lawsuit claims that these former employees exploited their personal connections to prioritize their asset withdrawals from FTX during the 90-day period before the exchange filed for bankruptcy. This period is known as the ‘Preference Period.’ According to U.S. law, customers who withdrew their crypto assets during this period could face clawbacks by the company’s creditors.
Suspected Illicit Transfers Worth $157.3 Million
The total value of the suspected illicit transfers is estimated at $157.3 million, with a significant amount withdrawn after November 7, 2022. Michael Burgess allegedly benefited from around $73 million of these withdrawals.
Accusations Against Matthew Burgess
Matthew Burgess, who had already left FTX Group, is specifically accused of enlisting other FTX Group employees to push out certain pending withdrawal requests from his own FTX US exchange accounts while misrepresenting the accounts as his own.
Post-FTX Trades and Trading Profits
The filing also reveals that the defendants made substantial profits from trading crypto through their owned entities including 3Twelve and BDK. They reportedly received transfers of digital assets and fiat currency from FTX Group entities and made monthly trading volumes ranging from $100 million to $400 million.
Sam Bankman-Fried Awaiting Trial
Sam Bankman-Fried, the former CEO of FTX, is currently detained and awaiting trial. His trial is set to commence on October 3. An appeals court recently dismissed his bid for release prior to the trial proceedings.
Hot Take: FTX Exchange Files Lawsuit Against Former Employees Alleging Exploitation and Illicit Transfers
Bankrupt crypto exchange FTX has taken legal action against four former employees accused of exploiting their personal ties to prioritize asset withdrawals during the crucial period before the exchange’s bankruptcy filing. The lawsuit alleges illicit transfers amounting to $157.3 million, with significant withdrawals benefiting one individual in particular. The defendants are also accused of making substantial profits from trading crypto assets through their owned entities. Meanwhile, FTX’s former CEO, Sam Bankman-Fried, awaits trial after his bid for release was dismissed by an appeals court. This ongoing legal battle highlights the complexities and potential consequences associated with bankruptcies in the crypto industry.
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