Crypto exchange FTX has dragged Crypto.com to court to recover funds tied to Alameda Research. In the lawsuit submitted at the United States Bankruptcy Court in the District of Delaware, FTX claim that Crypto.com has $11 million belonging to Alameda Research. The crypto exchange claims that the firm is refusing to return the funds.
In its filing, FTX claimed that Alameda maintained an account on Crypto.com before it filed for bankruptcy. The account was opened in the name of former Alameda employee Ka Yu Tin (also known as Nicole Tin).
The filing mentioned that the company frequently practiced that strategy, using its employee’s names and shell companies to open accounts to protect its trading strategies. Notwithstanding, the filing said that the account was funded and controlled by Alameda Research.
After Alameda filed for bankruptcy, Crypto.com placed an embargo on the account, restricting several FTX executives from accessing it despite many attempts. The filing said that despite several calls to enable access to the account, the platform repeatedly refused to heed the calls.
A possible scenario is the name on the account not matching any of the FTX executives who have tried to access the account. However, FTX claimed they explained beyond reasonable doubt and even showed court documents as proof, but Crypto.com did not lift the restrictions.
FTX wants authorization to hold Crypto.com assets
The issue between FTX and Crypto.com took a bizarre turn after the latter’s sister companies Foris MT and Iron Block also brought charges against FTX. The companies are seeking the green light to recover $18.4 million and $237,800 held on FTX’s platform before its collapse. FTX executives are now using the funds as leverage to recover the Alameda Research funds.
As part of their prayers to the court, FTX has asked the court to hold off on Crypto.com’s claims till it returns the Alameda asset. Aside from returning the funds, FTX wants the court to order the platform to pay its legal fees and other reliefs.
FTX has also initiated the same Crypto.com lawsuit against other firms in the industry to recover other Alameda funds. Aside from settling its lawsuit with Bybit recently, it still has an ongoing lawsuit against Upbit, KuCoin, and Gate.io.
Meanwhile, it remains relatively unknown if FTX is doing anything to recover about $400 million stolen from the platform after its bankruptcy. The hack was facilitated by Robert Powell, with the funds growing to $600 million. Powell has since been arrested and is presently under house arrest.
Criticisms trail the actions of the firm
The company’s executives believe the lawsuits are integral to recovering funds owned by Alameda and FTX. However, observers have criticized the approach of John Ray III and Sullivan and Cromwell law, which has led FTX to where it is after filing for bankruptcy.
Some observers also believe that the approach only increases the billable hours of the administrators. According to them, the administrators should have wound down all Alameda funds before filing for bankruptcy. As a result of their action, the company has funds lost on several centralized exchanges.
X user FTX Historian said the first examiner reported that $1.76 billion worth of digital assets were locked. He noted that the exchange will not be able to recover $130 million worth of funds on exchanges like BTCTurk, GATE, Huobi, and KuCoin.
Also, he said the administrators do not have the needed knowledge to handle post-bankruptcy recovery of assets, which has led to more losses. He referenced the situation of former Alameda Research CEO Caroline Ellison, who said the administrators fired her immediately after they took charge despite the new team lacking the needed expertise.