The bankrupt crypto exchange FTX has sued the former employees of Salameda, a Hong Kong-incorporated entity affiliated with FTX, for the recovery of about $157.3 million, according to a Coindesk report. The Hong Kong firm was controlled by the FTX Founder and former CEO, Sam Bankman-Fried, who is now behind bars awaiting trial.
FTX Sues Former HK Affiliate Employees
The lawsuit filed yesterday (Thursday) named Michael Burgess, Matthew Burgess, their mother Lesley Burgess, Kevin Nguyen, Darren Wong, and two companies, 3Twelve Ventures, and BDK Consulting, that controlled multiple accents on FTX.com and FTX.US. They were blamed for fraudulently withdrawing assets before the exchange filed for bankruptcy .
FTX.com, Alameda Research, and about 130 other global affiliates filed for bankruptcy on November 11, 2022. Three months before the bankruptcy filing, the individuals and entities benefited from preferential transfers, which "are avoidable under the Bankruptcy Code."
The court filing alleged that the defendants rushed to withdraw funds before the exchange halted withdrawals and used their connection with FTX employees to expedite their requests.
According to FTX, the defendants collectively withdrew more than $123 million of the total $157.3 million on or after November 7, 2022. FTX halted all crypto and fiat withdrawals on November 8.
The court filing stated that the withdrawals were made "with the intent to hinder, delay, or defraud FTX US's present or future creditors."
Recovery Attempts in Progress
The bankruptcy estate of FTX is in the process of recovering as much as it can. It is evaluating the prospects of recovering the funds that FTX paid several top athletes and clubs for endorsements.
Recently, FTX sued the parents of the FTX Founder, Joseph Bankman and Barbara Fried, aiming to recover "millions of dollars in fraudulently transferred and misappropriated funds." Bankman and Fried, both law professors at Stanford Law School, had allegedly used their legal expertise to siphon the funds.
Meanwhile, the collapsed crypto exchange received court approval last week to "sell, invest, and hedge" $3.4 billion in crypto holdings to settle its outstanding debts.
