A group of FTX customers say $8 billion of the company’s forfeited assets are rightfully theirs.
As Coindesk reported Tuesday (June 17), these customers are seeking a ruling that those forfeited assets do not belong to the failed cryptocurrency exchange’s bankruptcy estate.
This latest legal action comes weeks after the estate unveiled a reorganization plan that would give 98% of creditors 118% of their claims — in cash — within 60 days of court approval.
“FTX has achieved this recovery level by monetizing an extraordinarily diverse collection of assets, most of which were proprietary investments held by the Alameda or FTX Ventures businesses, or litigation claims,” the company said last month.
Alameda refers to Alameda Research, the FTX sister company at the center of the exchange’s collapse in the fall of 2022.
However, the bankruptcy plan has upset many FTX customers, who argue they missed out on the chance to benefit from the recent crypto rally when their funds were tied up in the bankruptcy case.
Coindesk, citing court documents, says the plaintiffs argue that FTX filed for bankruptcy during the so-called crypto winter, when cryptocurrency prices saw a dramatic drop.
The victims’ attorneys, Adam Moskowitz and David Boies, said in the filing the bankruptcy process has left “FTX customers feeling ‘aggrieved and robbed,’ many of whom view the bankruptcy process as a ‘second act of theft’ and that the ‘FTX bankruptcy estate remains to be the same fraudulent corporate entity’ as was the enterprise run by SBF.”
“SBF” is former FTX chief executive Sam Bankman-Fried, who was convicted and sentenced to 25 years in prison for fraud related to the exchange’s collapse. He is appealing the verdict.
“If not for SBF’s crimes for which he was convicted—i.e., the theft and misuse of customer assets—the customers would have today owned their crypto investments,” the filing said.
The filing also argues that the bankruptcy code requires prioritizing certain creditors over others, with holders of FTX’s FTT token at the bottom of the list.
“It is unlikely that holders of that token will receive compensation from the estate,” it said.
“We don’t know what the damages will be because complete accounting has not been done,” Moskowitz told CoinDesk, noting that “it is safe to say that over $8 billion” of damages are owed.
