The plaintiffs have argued that the customers of FTX have the first right over the exchange’s frozen funds, in an attempt to get their money back.
The collapse of the crypto exchange FTX-led to more than a million active customers losing their digital asset holdings. These customers have now come forward filing a class-action lawsuit against the exchange in an effort to their money back first.
Class-Action Lawsuit
Four individuals have filed a class action lawsuit demanding priority access to the frozen funds. They are now seeking a declaration that the company’s holding of digital assets belongs to its customers. The four plaintiffs filed the lawsuit earlier this week on December 27 in the United States Bankruptcy Court for the District of Delaware.
They are representing the whole class of former FTX customers, which are a total of 1 million individuals. The plaintiffs have argued that the FTX User Agreement didn’t permit the exchange to use customer funds for its own purposes. This includes either using them for operational expenses or borrowing them.
Also, the class action lawsuit adds that any removal of customer funds from accounts was an “impermissible co-mingling, misappropriation, misuse, or conversion of customer property”. The lawsuit thus adds that any funds frozen by FTX and traceable as customer property cannot be used for non-customer expenses. It further adds:
“Customer class members should not have to stand in line along with secured or general unsecured creditors in these bankruptcy proceedings just to share in the diminished estate assets of the FTX Group and Alameda.”
Crypto exchange FTX has yet to respond on this matter.
FTX Reportedly Facing DoJ Investigation
Last month, crypto exchange FTX faced a massive liquidity crisis amid heavy withdrawals and had to soon file for bankruptcy. However, a day after its filing for Chapter 11 bankruptcy, the crypto exchange faced a massive $400 million hack.
As per the latest details, the US Department of Justice has launched an investigation into this matter about the whereabouts of the missing funds from FTX. Many have started raising fingers over FTX’s disgraced founder Sam Bankman-Fried considering his criminal past.
In another such development, another foul play has been suspected as crypto wallets linked to FTX’s sister concern and bankrupt trading firm Alameda Research, started transferring funds just days after SBF’s $250 million bailout.
Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
