FTX, the bankrupt cryptocurrency exchange, has taken legal action against former Salameda employees. The lawsuit aims to recover a sum of $157.3 million. According to court filings, the defendants, including Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, and Darren Wong, allegedly used their FTX connections to make fraudulent withdrawals. These actions occurred in the days leading up to FTX’s bankruptcy on November 11, 2022.
The court documents indicate that these withdrawals are “preferential transfers.” They occurred within the 90 days before the bankruptcy filing.
Moreover, these transfers are “avoidable under the Bankruptcy Code,” the filing states. The defendants reportedly used their FTX connections to ensure their withdrawals took precedence over those of other customers. This lawsuit is another move by FTX’s bankruptcy estate to recover payments. Previous efforts targeted former CEO Sam Bankman-Fried and other connected parties.
Financial intricacies unravel
The lawsuit also points to Slack messages as evidence. Matthew Burgess allegedly asked other FTX employees to speed up specific pending withdrawal requests. These requests came from an FTX US account owned by Michael Burgess but were misrepresented as Matthew’s. The withdrawals were finalized just hours before FTX stopped all non-fiat user withdrawals on November 8, 2022. Additionally, more than $123 million of the total $157.3 million was withdrawn on or after November 7.
The court filing claims these transfers were made “with the intent to hinder, delay, or defraud FTX US’s present or future creditors.” This lawsuit adds another layer to FTX’s ongoing legal woes. It comes as former FTX CEO Sam Bankman-Fried sits in jail. His trial is set to begin on October 3, 2023. An appeals court recently denied his request for pre-trial release.
The lawsuit is part of a broader effort to recover assets after FTX’s bankruptcy. In January, it was reported that FTX had recovered more than $5 billion in assets. However, the bankruptcy team later stated the company still owes its customers a staggering $8.7 billion.