- FTX debtors have initiated a lawsuit against former employees of its Asian affiliate.
- The lawsuit paints a withdrawal spree by the employees moments before the exchange collapsed.
- The debtors seek to recover millions of dollars from the employees.
Bankrupt crypto exchange FTX has filed a recovery lawsuit against four former employees of its Hong Kong-based affiliate, Salameda, a company believed to have been under the direct control of former CEO Sam Bankman-Fried (SBF).
The lawsuit claims the employees fraudulently withdrew millions of dollars from FTX moments before the exchange collapsed.
Leveraged Personal Ties
In a document filed with the United States Bankruptcy Court for the District of Delaware, FTX debtors allege that Michael Burgess, Matthew Burgess, Lesley Burgess, Kevin Nguyen, and Darren Wong, along with two related companies, exploited their connections to withdraw assets from FTX when the exchange’s future became questionable.
The debtors specifically accuse Michael Burgess, whom they claim pressured FTX employees to authorize particular pending withdrawal requisitions from one of his FTX U.S. exchange accounts while misrepresenting the account belonged to him.
“Withdrawals representing substantially the entire balances of the FTX.com accounts registered in the names of Defendants Matthew Burgess and Lesley Burgess were processed successfully, with the final withdrawals completed just hours before the FTX.com exchange halted withdrawals on November 8, 2022,” the court document read.
The lawsuit alleges that the fraudulent withdrawals happened within the Preference Period, the critical 90-day duration before FTX filed for bankruptcy.
Seeking to Recover $157 Million
Hinging on the Chapter 11 code of the U.S. law that allows creditors to pursue legal remedies against customers who might have withdrawn assets from a collapsing company 90 days before it files for bankruptcy, the FTX debtors want to recover $157.3 million from the accused individuals.
Per the filing, transactions worth over $123 million of the total $157.3 million were made on or after November 7 to “hinder, delay, or defraud” the present and future creditors of FTX.
Read why Stanford University wants to return $5.5 million to FTX:
Stanford University to Return $5.5M “Gifts” from SBF’s Dad
Stay updated on why FTX sued SBF’s parents:
FTX Sues SBF’s Parents to Recover “Millions of Dollars”